What is a NAICS code?

The North American Industry Classification System (NAICS) was developed jointly by the U.S. Economic Classification Policy Committee (ECPC), Statistics Canada, and Mexico's Instituto Nacional de Estadistica y Geografia to classify the businesses operated in North America, according to their type of economic activity (the process of production). It was developed under the supervision of the Office of Management and Budget and was adopted in 1997. The NAICS was created to replace the U.S. Standard Industrial Classification System and provide a modernized and high-level compatibility system in business statistics among the North American countries.

How is a NAICS Code Used?

The NAICSis reviewed and updated every five years to ensure its effectivity and relevance. In 2002 substantial changes were made in the construction, wholesale trade, retail trade, and information sectors. In the 2012 revision, the number of industries was slightly reduced in the system and some of the systems sector classifications were modified. In 2017, the number of industries was reduced from 1,065 to 1,057. The size standards were also modified in the revision which affected nine industries. The North American Industry Classification System uses a hierarchical six-digit coding system. It classifies the businesses in 20 different industries according to their activities. Five of these industries are in the business of producing goods while 15 are providing services. The North American Industry Classification System provides a code to each company indicating the sector they belong to. A company may operate in different sectors, the primary NAIC code depends on the main business, that is the business that earned the company most of its revenues at a specific location during the past year. The first two digits of the code indicate the largest business sector of the company. The third digit indicates the sub-sector it belongs to. The fourth digit is designated to indicate the industry group of its operation. The fifth digit of the code designates the NAICs industries and the last digit of the code designates the national industries. The NAICs code for soybean farming is 111110, sector 11, subsector 111, industry group 1111, industry 11111 and NAICS code is 111110.