NAICS Frequently Asked Questions

 

What is a NAICS code? How is it used?

The North American Industry Classification System (NAICS) is an arrangement between Canada, Mexico and the United States by which businesses are designated based on their type of economic activity. The system uses a six-digit coding structure where each additional digit narrows the scope of the business grouping.

 

NAICS was developed by Mexico's INEGI, Statistics Canada, and the U.S. Economic Classification Policy Committee. The goal was to produce common industry definitions for Canada, Mexico and the United States. These common definitions help with economic analysis of the economies of the three North American countries. 

 

By classifying each establishment and business into specific categories under the NAICS system, statistical data and analysis related to the North American economies can be more easily collected and presented.

 

NAICS can be used for different purposes, not just statistical data collection. For example, various regulatory, administrative, procurement and taxation tasks require the use of the NAICS system.

 

Read more about what a NAICS code is and why your business needs one. 

 

What is the NAICS code structure? What do the digits mean?

The NAICS system uses a six-digit coding structure. NAICS codes can be 2- to 6-digits and the further along the hierarchy, the more detailed and specific the category will be.

 

• Two digits designate the Sector
• The third digit: Subsector
• The fourth digit: Industry Group
• The fifth digit: NAICS Industry
  • The level of the system that is comparable across United States, Mexico and Canada
• The sixth digit: National Industry

 

I’ve seen NAICS codes longer than 6 digits. What does that mean?

An industry is defined at the complete 6-digit level of the official NACIS classification system. A code that has more than six digits may be used in economic census and survey programs to further specify the business activity, product or service.

 

For example, 7- and 8-digit NAICS codes are used in the Economic Census to disseminate data and provide finer details of the industries below a 6-digit industry level.

• For example, under the NAICS Subsector 311 Food Manufacturing, 311111 is the complete NAICS for the Dog and Cat Food Manufacturing Industry.
  • The 7-digit product code 3111111 stands for dog food only, while product code 3111114 stands for cat food only.
  • The 8-digit product code 31111111 represents canned dog food, while the 8-digit product code 31111144 represents canned cat food, and so on.

Who assigns NAICS codes to businesses and how?

Governmental agencies across Canada, Mexico and the US use different methods of assigning a NAICS code to individual establishments for specific purposes. There is no central agency that assigns or approves a NAICS code for establishments. Various agencies, regulation boards and trade associations implemented the NAICS in order to organize their own list of establishments.

 

For example, the US Census Bureau assigns the NAICS code based on the establishment’s primary activity to collect and analyze data about the economy. Still, the US Census Bureau is not an official arbitrator of NAICS classification.

 

What is a “primary business activity?”

Several variables, such as revenue or value of shipments, can be used to determine the primary business activity of an establishment. Primary business activity can also be determined by relative share of production costs and/or capital investments.

 

In the United States, the US Census Bureau uses revenue or value of shipments to determine the primary business activity. For an establishment, the activity that generates the most revenue would be classified as the primary business activity.

 

For example, while a brewery might operate a restaurant that contributes a small percentage to their overall revenues, the company would be classified in the brewery industry by most classification systems.

 

How and where can I find the NAICS code for a business? How do I know if I’ve found the right NAICS code for my company?

NAICS code are self-assigned based on the business’ primary activity. You can use IBISWorld’s NAICS Lookup Tool to find the appropriate NAICS code for your business.

 

Learn how to find the NAICS code for your business

 

Can a business have more than one NAICS code?

Even though it varies by agency and country, in the United States, the US Census Bureau only assigns one NAICS code for each establishment. The Business Register Survey within Statistics Canada and the National Institute of Statistics and Geography (INEGI) in Mexico have also taken the unofficial role of assigning NAICS to establishments in their respective countries.

 

The NACIS code is correspondent to the establishment’s primary business activity, usually the one that generates the most revenue. However, depending on the policy of other agencies, some businesses are registered with more than one NAICS code.

 

Can I have my company’s NAICS code changed?

Changing a company’s NAICS code depends on the agency that has assigned the NAICS. There is no central register that has the official NAICS classification for business establishments.

 

Some Federal agencies maintain a directory of establishments with their respective NAICS that are assigned based on what information each establishment provides across different surveys and administrative records. In order to change a NAICS, the company should contact the agency that has assigned it directly.

 

Can I have a new NAICS code created for my business?

A new NAICS code could only emerge when the NAICS is being reviewed. Every five years the NAICS is reviewed so that the classification system remains up-to-date and evolves with the economy. The Economic Classification Policy Committee (ECPC) maintains and reviews the NAICS. Proposals and recommendations from the public are revised by the ECPC. The ECPC then sends any recommendations to the Office of Management and Budget (OMB), and together they make a decision on change.

 

If my business is located outside of North America, do I have/need a NAICS code?

Only the domestic locations of a business would be assigned a NAICS code. The NAICS only accounts for business establishments that are located within the United States, Canada and Mexico.

 

Do NAICS codes change over time?

Every five years, the NAICS system is reviewed and codes are eligible to be redefined, absorbed into similar codes or otherwise amended. New codes may be added if deemed suitable or necessary. These revisions are meant to reflect changes in the economy, such as content revision in specific areas, title changes or clarifications of industry definitions.

 

Therefore, yes, there are variations among NAICS 2002, NAICS 2007, NAICS 2012 and NAICS 2017. For example, in 2007 there were more industries listed in the NAICS system than in 2012.

 

For the most up-to-date representation of a business or industry, look up the latest NAICS 2017 revision.

 

How can I find data for a specific NAICS code?

IBISWorld’s has an easy-to-use NAICS Code lookup tool. Simply enter a keyword or NAICS code into the search box and the tool will help you find data and information. Or, you can select a 2-digit sector category and drill down to discover industries within that sector. 

 

What is the difference between enterprise and establishments under NAICS?

An establishment is defined as a single physical location where a business or service is conducted.

• Examples include: hotel; movie theater; farm; factory; retail store

An enterprise may consist of one or more establishments that are mostly owned by the same entity. These establishments could be conducting the same business or performing different types of economic activities.

• Examples include: AMC Entertainment Holdings, Inc.; Walmart Inc.; Marriott International, Inc.

Within an enterprise, each establishment is assigned a NAICS code depending on the primary economic or business activity.

 

How can I find data for a specific NAICS industry?

IBISWorld industry reports analyze industries at both the five- and six-digit NAICS level, while also offering corresponding sector reports at the two-digit NAICS level.

 

For example, the Seafood Preparation in Canada industry is involved in canning, smoking, salting, drying, freezing and packing fish and shellfish This industry is a part of the larger Manufacturing sector, which is made up of all establishments that transform raw materials into new products via mechanical, physical or chemical processes.

 

Understanding the distinction between an industry and its broader overarching sector is vital to discern the value of the level of granularity industry research offers. Analysis of an industry at the five- or six-digit NAICS level can be leveraged by businesses in any industry to both comprehend and strengthen their position within their marketplace.

 

IBISWorld Industry Research and NAICS

IBISWorld industry reports analyze industries at both the five- and six-digit NAICS level, while also offering corresponding sector reports at the two-digit NAICS level. We offer over 1,300 US Industry Reports, 400+ Canada Industry Reports and 100+ Mexico Industry Reports.

 

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