Economic Classification Policy Committee (ECPC) Recommendation for Classification of Sales Offices of Publishers in North American Industry Classifica

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1 Economic Classification Policy Committee (ECPC) Recommendation for Classification of Sales Offices of Publishers in North American Industry Classification System (NAICS) Revisions for 2012 In the January 7, 2009 Federal Register notice, the ECPC solicited input on the classification of separate sales offices for publishing enterprises. An historical note helps provide context for the ECPC recommendation on this issue. Prior to adoption of the NAICS, statistical agencies in the United States used the Standard Industrial Classification (SIC) when collecting and disseminating data. In the SIC, publishing was classified as a manufacturing activity and separate sales offices of manufacturers were classified to wholesale trade by rule as manufacturers sales branches or offices. The 1949 SIC manual included the following description, Separately incorporated sales companies of manufacturing and mining concerns are considered independent wholesalers, and are classified with merchant wholesalers in Major Group 50. Manufacturers sales branches frequently install machinery, equipment, or apparatus sold by them, and are sometimes engaged in leasing or renting machinery or equipment. Such activities are considered a part of the normal wholesale functions, and are included in this major group. (1949 SIC Manual, Volume II, page 65) The 1939 Census of Business and Manufactures provided specific guidance for identifying sales branches carrying stock for delivery and sales offices carrying no stock. (Instructions for enumerators, Business and Manufactures, 1939 page 34). At that time, sales reported were to include both bookings (sales delivered directly from the factory) and sales from inventory. So from the earliest reviewed materials, there have been consistent distinctions and classification guidance for manufacturers sales branches and offices. The next revision of the SIC in 1957 removed separate identification of manufacturers sales branches and offices from the industry structure but noted a more generic inclusion in brief notes of the Major Group (two-digit SIC level). While it may be reasonable to assume that the change was made because of problems with the separate identification of sales branches and offices as well as agents and brokers, there was no information included in the manual and it was not mentioned as a significant change in the introduction. The extent of mention from 1957 to 1987 was unchanged as, sales branches and offices (but not retail stores) maintained by manufacturing or mining enterprises apart from their plants or mines for the purpose of marketing their products. NAICS brought a new concept for information industries that are neither manufacturing nor services to the classification. The information industries defined in NAICS include activities that resemble manufacturing at times (production of physical goods such as

2 books or magazines) but also increasingly focus on dissemination of information and data using a wide range of formats and media types. This change raised a question about how to classify separate sales offices of units classified to the information industries. NAICS generally classifies sales offices of service providers within the service provision industry unless a separate industry is identified. NAICS retained the practice of classifying separate sales offices of manufacturing units in wholesale trade as manufacturers sales branches or offices. No guidance was provided for the classification of units that moved from manufacturing to information in NAICS. There are two possible choices. The first is wholesale trade relying on the old manufacturing concepts and the assumption that physical goods are the primary products being distributed. The second is in information following a more service industry oriented classification practice. The ECPC recommends classification in the information sector for separate sales offices of publishing enterprises. The justification for inclusion with information relies on the fact that information industries (and products) are different from either goods or services and therefore the old manufacturing treatment need not necessarily apply. A second major consideration is that much of the publishing activity itself is taking place in the offices where sales are booked. In addition, there is some evidence that the sales offices are also playing a major role by selling advertising time and space for publishers. Further research during the 2007 Economic Census confirmed that classification of publishers sales offices outside of information would seriously compromise the quality and coverage of information industry statistics. The ECPC notes that this decision relates only to affiliated sales units of publishing enterprises and does not include independent book, periodical, newspaper, audio, or video wholesalers who undertake the usual wholesale trade functions in the distribution of published goods.