The North American Industry Classification System (NAICS) is a business classification system established through collaboration between United States, Mexico, and Canada. The classification system makes it easier to compare data on all business activities across North America. Categorized industries are broken down into sectors characterized by the same or different production processes.
The NAICS was set up to replace and modernize the U.S. Standard Industrial Classification (SIC) system. The new system makes it easier to compare all countries in North America. To ensure that it continues to be effective, a redesign of the program will take place every five years.
NAICS Coding System
The NAICS classification system is more versatile than the four-digit SIC model. For instance, NAICS uses a hierarchical six-digit coding system, which classifies all economic activity in 20 different sectors of industry. Five of these sectors are mainly manufacturing goods, while the remaining 15 sectors offer some kind of operation. Corporations receive a primary NAICS code indicating their main line of business.
The highest level of the NAICS category is the “sector,” which corresponds to the SIC’s “section.” NAICS doubles the number of top-level industrial classification categories, with 20 broad sectors compared with 10 in SIC.
The expanded scope includes services such as:
- Information
- Academic
- Scientific and Technical Services
- Maintenance and Support
- Waste Management
- Remediation Services
- Accommodation and Food Services
The 20 sector codes are divided into 312 four-digit industry codes, and then subdivided into 713 five-digit business sector codes. Finally, the codes are broken down into 1,066 six-digit NAICS codes.
Sectors
- 11 – Agriculture, Forestry, Fishing, and Hunting
- 21 – Mining
- 31-33 – Manufacturing
- 22 – Utilities
- 48-49 – Transportation and Warehousing
- 42 – Wholesale Trade
- 44-45 – Retail Trade
- 72 – Accommodation and Food Services
- 52 – Finance and Insurance
- 53 – Real Estate and Rental and Leasing
- 51 – Information
- 54 – Professional, Scientific, and Technical Services
- 56 – Administrative & Support, Waste Management & Remediation Services
- 61 – Educational Services
- 62 – Health Care and Social Assistance
- 71 – Arts, Entertainment, and Recreation
- 81 – Other Services (Except Public Administration)
- 92 – Public Administration
- 55 – Management of Companies and Enterprises
Reading a Code
The first two digits of a NAICS code reflect a company’s largest business area. The third digit shows the subsector of the company, and the fourth digit refers to the business’ industrial grouping. The fifth digit of the code reflects the specific business sector of the company. Finally, the sixth digit defines the domestic industry of the company. Example: soybean farming has NAICS code 111110 which is divided into sector 11. Sub-sector 111, industry group 1111, business sector 11111, and domestic industry 111110.
