What Are NAICS Codes and Why Are They Important?

NAICS codes (North American Industry Classification System) are a key tool for classifying and organizing economic activities across North America. Widely used in the United States, Canada, Mexico, and Puerto Rico, these codes provide a standardized way to identify different industrial and commercial sectors. They are essential for economic analysis, statistical reporting, business registration, and government decision-making.

What Are NAICS Codes Used For?

NAICS codes serve many purposes in both the public and private sectors. They are used to:

• Classify businesses based on their primary economic activity
• Apply for business licenses and permits
• Participate in government contracting and procurement
• Conduct market research and industry analysis
• Register businesses with official agencies
• Facilitate the collection and comparison of economic data

How Are These Codes Structured?

NAICS codes are six-digit numbers that identify economic activities in a hierarchical way:

• First 2 digits: Identify the general economic sector
• 3rd digit: Identify the subsector
• 4th digit: Represent the industry group
• 5th digit: Indicate the specific industry
• 6th digit: Distinguish national industries between the U.S., Mexico, or Canada

This structured system allows for detailed classification and cross-country comparison of economic activities within North America.