Adding bio-based products and materials to statistical classifications

The environmental problems caused by adverse effects of plastics and other materials has increased interest for bio-based materials. In this context, projects such as the EU funded BioMonitor set out to measure and monitor the bio-based economy. In the BioMonitor project, methods are developed to measure the bio-based economy now and in the future. This topic is still emerging and using coefficients to determine the bio-based shares per product category is best method currently available to measure the size of the bio-based economy. However, in order to monitor the development of the bio-based economy these shares need to be updated frequently which is a time-intensive process. These shares are not sufficiently accurate to reliably capture small developments. Hence, in parallel the BioMonitor project investigates how information on bio-based products and materials can be captured through statistical classifications. This requires adding new codes for bio-based products and materials to existing classifications. The aim of this report is to aid in this process by developing a better understanding the steps, considerations and timeline of changing statistical classifications.

While bio-based products and materials are on the rise, it is still difficult to quantify and monitor the development of the bio-economy. This is because bio-based materials and products are increasingly used to substitute petrochemicals but are not separately captured by statistical classifications. To improve monitoring of the development of the bio-based economy in the future, new statistical codes need to be added to international classifications of goods and industries. The aim of this report is to outline the process of proposing and introducing new codes in statistical classifications. More specifically, it explains the structure of these codes, presents the steps from proposal to introduction and highlights the considerations and institutions involved in this process. It aims to contribute to the drafting of proposals for new classification codes.

The report focuses on three potentially interesting classifications and outlines the process of changing them to accommodate new codes. In doing so, it sets out the responsibilities within and the timeframe of these processes and examines dependencies on and interrelations with other classifications. The first classification for which the process is described is the Combined Nomenclature (CN). CN codes are used to classify goods for customs and international trade. The second classification is PRODCOM, which classifies produced goods and industrial services. And the third classification for which the process is described is the Nomenclature des Activités économiques des Communautés Européennes or NACE. NACE codes are used to classify the industries to which different economic activities belong. The report concludes with recommendations and conclusions for proposing new codes to capture bio-based materials and products statistically in the future. The codes and classifications covered in this report are also connected to or partially derived from other classifications. These dependencies and connections are also outlined as they determine which digits of which classification can be altered by which organisation and how that influences other classifications. Many statistical codes include parts that are defined globally and additional parts that are defined on a European level; the focus of this report is primarily on outlining the classification alteration processes on a European level.

This report distinguishes four steps in the revision processes of the classifications, these steps are used to describe these processes consistently. Each step may consist of several sub-steps. The four steps are:

1. Initiation of revision and suggestions for changes
2. Submission of proposed changes
3. Evaluation of proposals and decision (steps and criteria)
4. Publication and implementation

The findings presented in this section are based on desk research and interviews with CN-code experts working at organisations such as Statistics Netherlands, Eurostat, DG TAXUD and the Dutch customs.

2.1 What are CN codes and who governs them?

The Combined Nomenclature (CN) is used to classify goods. This classification of goods is used to set Common Customs Tariffs and for the EU's external trade statistics. The CN is also used in intra-EU trade statistics. It is based on the World Customs Organization's Harmonized System nomenclature with additional EU-specific subdivisions. The Harmonized System is a list of commodities applied by most trading nations.

More specifically, the first 6 digits of the CN-codes correspond to the Harmonized System nomenclature that is governed by the World Customs Organization (WCO). The 7th and 8th digits of the CN-codes are governed by Eurostat and the EU Directorate General for Taxation and Customs Union (DG TAXUD). Statistics Netherlands (CBS) does not play an active role in this. However, users of these codes, including national statistics institutes (NSIs), can submit suggestions for changes to Eurostat or DG TAXUD.

2.2 Introducing new CN codes: timing and responsibilities

2.2.1 Timing and initiation of CN code alteration

According to the European Commission’s website, the CN codes are revised and updated annually. “Every year, Annex I to the basic CN Regulation (Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff) is updated and published as a stand-alone Regulation in the EU's Official Journal. Such updates take into account any changes that have been agreed at international level, either at the World Customs Organization (WCO) with regard to the Harmonized System (HS) nomenclature or within the framework of the World Trade Organization (WTO) with regard to conventional duty rates. Other changes may be required to reflect the evolution of, for example, commercial policy, technological or statistical requirements.” (European Commission, 2021a)

The CN is accompanied by a code of conduct to prevent unwarranted expansion of the nomenclature and to outline how new codes can be proposed and introduced. The annual updating process is intended to result in modernisation of the CN, taking into consideration technological or commercial developments (European Commission, 2000). Generally speaking, CN proposals suggest the splitting of existing codes.

2.2.2 Classifying and defining goods for the CN

When proposing new CN codes, a clear definition of what exactly this new category would comprise is crucial. These definitions will also be used by customs in the future to check and test that traded goods are classified correctly. According to the European Business Statistics Manual published by Eurostat (2021a, p. 91), the basic criterion for the classifications of goods in the HS and the CN are the ‘physical properties and intrinsic nature’ of the goods concerned, based on inherent criteria such as:

• the raw materials they are made of;
• the stage of production they have reached;
• how they are produced;
• the purpose or user category for which they are intended;
• whether they can be stored.

A goods classification is thus determined primarily by its inherent features. These features can also be used to define goods for which a new CN code is proposed. The important thing is that there is a way to check or test whether products have been correctly classified.

2.2.3 Official guidelines for CN-codes and their alteration

This section presents and summarises excerpts from the CN Code of conduct (European Commission, 2000). These excerpts have been taken from the Customs Code Committee, Tariff and Statistical Nomenclature Section.

The CN subheadings in the HS nomenclature should reflect:

• the EC’s international commitments (for example WTO tariff concessions and WCO recommendations),
• various EC policy requirements expressed by the competent Commission departments (where the needs are not met elsewhere),
• legitimate needs of a Community nature for specific sectors expressed by Member States and by European Federations.

Modernisation

• The modernisation of the CN will involve creation or deletion of CN subheadings, changes to the CN subheading structure or modifications of descriptions, in particular in accordance with Article 9(1) of Regulation (EEC) No 2658/87.
• 3.2.2. In modernising the CN, due account shall be taken of nomenclatures related to the CN (e.g. PRODCOM).

The nomenclature

• When amending the nomenclature structure of the CN, the code number allocated to a CN subheading should be maintained, where the coverage of the CN subheading remains the same or the change in coverage is a minor one.
• A CN subheading cannot be deleted unless it has been in force for at least two calendar years. C 150/6 Official Journal of the European Communities 30.5.2000 EN
• Descriptions in the CN should be clear, precise and concise, and if necessary accompanied by legal notes.
• The products to be covered by a CN subheading should be clearly identifiable or recognisable on the basis of objective and measurable criteria.
• The descriptions in the CN should observe the parallelism between the different Community language versions of the CN and coherence in the terminology used.
• The tariff annexes to the CN should normally be used only for products which are the subject of specific WTO tariff measures and for which the creation of CN subheadings is not deemed necessary.
• ‘TARIC subheadings for statistical purposes’ shall reflect the needs of the Community. Such subheadings shall enter into force on the first day of a month, apply on a monthly basis for at least one year and be subject to the normal review cycle for CN codes.

2.3 Steps for proposing and introducing new CN codes

1. Initiation of revision and suggestions for changes (annual revision)
   a. Sometimes (new) products are placed in different categories by different countries. As the EU is a customs union, this should not happen. Therefore discovering such discrepancies can trigger the development of new regulations, explanatory notes and codes.
   b. New CN codes can also be suggested by trade unions.
   c. New CN codes can be proposed by federal statistics and customs bureaus.
2. Submission of proposed changes
   a. First submit a proposal at EU level. For a proposal to have a chance to come into force on 01/01/2023 it should be submitted by the end of 2021.
   b. Proposals need to be submitted before April to be able to be considered for implementation the following year. Usually, the proposals are uploaded into an IT system of the EU in April.
3. Evaluation of proposals and decision
   a. Evaluation steps:
   i. First, the proposals that TAXUD and Eurostat receive are allocated and shared with relevant EC departments and classification experts, statisticians, topic experts. At this stage the proposals are internally evaluated to determine their relevance, importance and feasibility. There can be several iterations with the proponent to clarify or refine unclear aspects. This might lead to approval, new insights, additions, changes, removal of parts, or rejection of the proposal.
   ii. Subsequently, the remaining proposals are attached to a working document by TAXUD and sent to the EU Member States for their information.
   iii. The proposals are then sent to the Customs Code Committee, Tariff and Statistical Nomenclature Section for evaluation. This committee meets three to four times a year and receives the working document, the proposals and the agenda 15 days prior to the meeting. Committee members are delegated by the Member States and generally work at the national customs office, ministry of finance or NSI. At the committee meetings the proposers present their proposals. (If the proposal is to be presented by someone who is affiliated with neither the NSI nor the customs office this needs to be approved in advance by the Member States.) The Customs Code Committee can accept, reject or request further information on proposals during the meeting. Straightforward proposals (e.g. a single, simple product to be added) are sometimes accepted very quickly. However, for more complex proposals there might be several iterations at this stage. The committee might ask the proponent for clarifications or changes 
   iv. Proposals that have been accepted by the Customs Code Committee, are subsequently subject to internal EU ratification procedures. Several EU organisations need to agree to the proposed changes. The accepted proposals are then sent back to the committee along with translations in the all EU languages 
   v. The Customs Code Committee votes on the remaining proposals in July. Each member state has one vote it can use in favour or against a proposal. A proposal is accepted if a qualified majority of votes is in favour of the proposal 
   vi. Adjustments to the nomenclature need to be approved by the parliaments of the EU Member States 
   b. Evaluation criteria:
   i. Importance of the proposed codes. E.g. societal relevance or importance in regard to new policies or technological trends.
   ii. Clarity of the definitions of the proposed codes. Can they be applied and checked by customs officers in all EU Member States?
   iii. Trade volume estimate of the good and/ or share of the good of the current code. There are approximate financial trade volume thresholds to introduce new codes on different levels:
   1. 25 million euros for a new subheading at EU level (digits 7 and 8)
   2. There are some exceptions, for example if the proposed codes are of very high importance or if they would cover a substantial but below-threshold trade volume but are growing very fast.
4. Publication and implementation
   a. In October, a book is published comprising all the changes to the CN codes. This way Member States and companies have sufficient time to implement the new codes before they come into force.
   b. The accepted changes come into force on 1 January of each calendar year.

2.4 Interrelation with other classifications

Harmonized System nomenclature: The Harmonized System was introduced in 1988 and has been adopted by most countries worldwide. It has undergone several changes in the classification of products. These changes are called ‘revisions’ and entered into force in 1996, 2002, 2007, 2012 and 2017 (UN Stats, 2021).

The CN codes are generally taken as a reference for the PRODCOM codes. PRODCOM codes are usually not more detailed than CN codes. It would certainly be interesting to determine the largest bio-based product categories (definitely fewer than 10) and to propose that the corresponding CN codes be split. This alone could provide more rigorous insights into the development of the bio-based economy. In the future, when volumes of other bio-based products are larger, new CN codes can be proposed for these as well.

2.5 Recommendations for proposing new CN codes

• The Code of conduct is very useful to inform the drafting of a proposal for new CN codes (see References section for the link).
• Proposals need to a) state a reason for the proposed change, b) clearly define the goods for which new codes are suggested and c) not contradict other EU legislation.
• The most important evaluation criteria for CN proposals are a) the estimated volume of the good and b) the clarity of the definition for customs to check goods’ classifications.
• The length of this process is strongly influenced by the complexity and clarity of the proposal (and goods definition) and the number of new codes proposed.
• Ideally, only a few codes for the most important bio-based goods should be proposed. This is a cross-cutting topic (like introducing new codes for gen-manipulated produce or second-hand goods) that could lead to a large number of new codes which is undesirable. What are the largest, most important categories of bio-based products?
• Clearly define the proposed categories and think of how customs officers can check the correct classification of these goods.
• Get input on the proposal from DG GROW, European trade associations and national customs services.

The findings presented in this section are based on desk research and interviews with PRODCOM experts working at organisations such as Statistics Netherlands and Eurostat.

3.1 What are PRODCOM codes and who governs them?

The PRODCOM list provides codes to label products manufactured in European countries for the EU production statistics. This list is governed by Eurostat. Some PRODCOM headings refer to industrial services (finishing, installation and maintenance etc.). The term PRODCOM comes from the French PRODuction COMmunautaire (Community Production). PRODCOM covers mining, quarrying and manufacturing: sections B and C of the Statistical Classification of Economy Activity in the European Union (NACE 2). “The purpose of PRODCOM is to inform the European business sector (including business associations, business consultants, and firms), the Commission, and the DG’s of for example Environment, Enterprises, Industry, Agriculture, Business Negotiation and Competition, on the EU supply of industrial products.” (see the PRODCOM User Guide, European Commission, 2017)

Some recent changes have been made to the PRODCOM list to improve capture of circular economy products and services. More specifically, codes for secondary raw materials have been added, namely 38.32.20.00 Metal secondary raw materials and 38.32.30.00 Non-metal secondary raw materials (based on NACE section E). These two codes have been adopted from the CPA classification; however, these are the first two codes from this section of the CPA that have been added to the PRODCOM list.

The first steps towards better representation of bio-based products in statistics were taken in 2016, when three dedicated codes for bio-based products were introduced in the CN and PRODCOM classification systems: bio-based lubricants (PRODCOM code 20.59.41.59), succinic acid (20.14.33.82) and 1-4 butanediol (20.14.23.38). The proposals to include these products date back to recommendations by the Renewable Raw Materials (RRM) Group to DG TAXUD. In this case, it took one to two years from submitting the proposals until approval. One reason for this was that the majority of the proposals were initially rejected by the Member States within the PRODCOM Working Group and were then resubmitted by DG GROW. These examples show that there is an interest at the European level to cover this type of activities better in statistical classifications.

3.2 Official guidelines for the use and alteration of PRODCOM codes

The PRODCOM survey has to fulfil three conditions:

• in each reporting country at least 90 percent of production in each (4-digit) class of relevant NACE classes must be recorded
• all enterprises with 20 or more employees in each NACE class should be covered
• if a Member State’s production in each NACE class represents less than 1 percent of the Community total, then data for the headings in that class do not need to be collected. In this case production should be reported as zero.

The PRODCOM list has an irregular revision schedule. The latest PRODCOM list became applicable as of 1 January 2019 (European Business Statistics Manual, Eurostat, 2021a). Until 2017 the PRODCOM list was revised yearly. The list is now revised irregularly with the aim to preserve and improve its relevance.

“Currently there are almost 3,900 products available in the PRODCOM list and it was agreed by the PRODCOM Working Group of November 2016 to keep the list stable and update it only with the frequency required by the technological changes in the industries and as driven by the related nomenclatures (i.e. the PRODCOM list will be updated if the NACE and the HS/CN classification are updated).” (PRODCOM user guide, 2017).

3.3 Steps for proposing and introducing new PRODCOM codes

1. Initiation of revision and suggestions for changes (revision roughly every 2 years)
   a. EC DGs can propose new PRODCOM codes in response to identified emerging trends that need to be captured.
   b. NSIs of the EU Member States can propose new codes.
   c. PRODCOM group members can propose the merging, splitting or clarification of codes.
   d. Business associations can also propose new codes.
   e. Changes in CPA, NACE, or CN codes (e.g. merge, split, reorganisation) can trigger changes in the PRODCOM list.
2. Submission of proposed changes
   a. Proposals are submitted to the PRODCOM working group.
3. Evaluation of proposals and decision (steps and criteria)
   a. Evaluation steps:
   i. Internal consultation: organisations of the European Commission provide their feedback on the proposed changes.
   ii. There is a PRODCOM Working Group and a PRODCOM Task Force, both with roughly the same members. The PRODCOM Task Force is a technical group that discusses proposals and implications of changes to the NACE and CPA classifications. This Task Force usually meets once a year around June. The PRODCOM Working Group meets once a year around November and decides which codes should be added or removed. In these meetings proposals are discussed and voted on. Proposals supported by a qualified majority of one these committees proceed to the next step.
   iii. The Commission submits a draft of measures to the Council of the European Union and the European Parliament.
   iv. Member States vote formally (weighed by population).
   b. Evaluation criteria:
   i. Relevance of codes: new codes should correspond to needs of policy users (e.g. governments, DGs etc.) and be meaningful for policy.
   ii. Economic value and volume of production of proposed new code.
   iii. Feasibility: it needs to be practically feasible for companies to report on the proposed code.
   iv. Corresponding CN codes: the new PRODCOM codes should correspond with existing CN codes as there are quite some waste material CN codes. In general, the PRODCOM Working Group tries to avoid splitting codes further than the corresponding CN codes.
4. Publication and implementation
   a. As PRODCOM revisions are irregular events, there is no fixed date for the publication and coming into force of the updated PRODCOM list.
   b. The revision that is taking place in 2021 will come into force in 2022.

3.4 Interrelation with other classifications

The PRODCOM is partly based on the NACE and CPA classifications and will thus follow changes made to these classifications.

NACE (Statistical classification of economic activities). The products in the PRODCOM list are those related to activities listed in sections B and C of the NACE classification. The first four digits of the PRODCOM codes correspond to the NACE.

CPA (Statistical classification of products by activity). The first six digits of the PRODCOM codes correspond to the CPA codes.

CN (Combined Nomenclature). Most eight-digit PRODCOM codes have a (near) complete reference to the CN. A complete reference means full comparability between data from PRODCOM and data from foreign trade classified by the CN (PRODCOM user guide, 2017). Each PRODCOM heading normally corresponds to one or more CN codes.

3.5 Recommendations for proposing new PRODCOM-codes

• Consider whether the proposed codes could be implemented in practice and whether companies could actually report on them accurately.
• Ideally one proposal would include a very limited number of suggestions for new codes (for example three to five new codes).
• One challenge for bio-based materials is that there are very few CN-codes for bio-based products and materials while the CN is usually more detailed than the PRODCOM. PRODCOM Working Group members are generally reluctant to accept PRODCOM codes that are more detailed than the corresponding CN codes.
• For research groups it would be preferable to submit a proposal via an NSI.
• As materials are usually not considered in the PRODCOM codes, a strong case needs to be made for why codes should be split into a bio-based and a non-bio-based code.
• The CPA classification is generally more detailed; check this classification for relevant codes. The process of defining a code and connecting it to other classifications can be easier if the code already exists in other classifications.
• In practice proposals often go through several iterations before they are potentially  eventually implemented.

The findings presented in this section are based on desk research and interviews with NACE experts working at organisations such as Statistics Netherlands and the European Joint Research Centre.

4.1 What are NACE codes and who governs them?

The NACE classification delineates industries. The current NACE classification came into force in 2008. The term NACE is an acronym that stands for the French Nomenclature des Activités économiques des Communautés Européennes. NACE codes can have up to six digits, the first two of which are governed worldwide by the UN, the third and fourth by the EU and the fifth and sixth can be chosen by the individual Member States.

4.2 Timing and responsibilities of introducing new NACE codes

4.2.1 Timing and initiation of NACE-code alteration

The NACE classification is revised every 15 years to reflect reality better. These revisions typically take several years: for instance, the current NACE classification stems from 2008 and the next revised version is planned to come into force in 2024. An initial consultation of the NSIs for this revision took place in 2018 and the revision task force was formed in 2019, with members from 20 EU Member States. The structure of the new NACE will be ready by the end of 2022. Sometimes changes are made between revisions. These are then implemented by Eurostat in so-called "case laws", usually following an extensive discussion on the Eurostat forum for the NACE classification.

Initially (in 2018) proposals for amendments were put forward by NSIs of the Member States, often suggested to them by other departments and organisations. Subsequently, other stakeholders were consulted in 2019 (a very wide consultation round with all kinds of authorities/organisations/ (Eurostat) working groups/directorates, etc.).

In 2019, DG Environment shared a list of proposals for the NACE review with Eurostat, many of which fully or partly relate to the circular economy.

4.2.2 Official guidelines for defining NACE-codes

The documentation of the last NACE revision (Eurostat, 2008) includes some criteria for adding and changing codes at different levels within the NACE classification. The “NACE consists of a hierarchical structure (as established in the NACE Regulation), the introductory guidelines and the explanatory notes. The structure of NACE is described in the NACE Regulation as follows: i. a first level consisting of headings identified by an alphabetical code (sections), ii. a second level consisting of headings identified by a two-digit numerical code (divisions), iii. a third level consisting of headings identified by a three-digit numerical code (groups), iv. a fourth level consisting of headings identified by a four-digit numerical code (classes).” (Eurostat, 2008, p. 15).

The following are excerpts taken from Eurostat (2008, p. 21):

The criteria used to define and delineate classification categories at any level depend on many factors, such as potential use of the classification and availability of data. These criteria are applied differently at different levels of the classification: the criteria for detailed levels of the aggregation consider similarities in the actual production process, while this is largely irrelevant at more aggregated levels of the classification.

Criteria for classes
40. The criteria concerning the manner in which activities are combined in, and allocated among, production units are central in the definition of classes (most detailed categories) of NACE. They are intended to ensure that the classes of NACE will be relevant for the detailed industrial classification of units and that the units falling into each class will be as similar, in respect of the activities in which they engage, as is feasible.

41. NACE Rev. 2, reflecting the fourth revision of ISIC, generally gives more importance to the production process in the definition of individual classes. This means that activities are grouped together when they share a common process for producing goods or services, using similar technologies.

42. In addition, the classes of NACE are defined so that the following two conditions are fulfilled whenever possible: a. The production of the category of goods and services that characterises a given class accounts for the bulk of the output of the units classified according to that class; b. The class contains the units that produce most of the category of goods and services that characterise it.

43. Another major consideration in defining classes in NACE is the relative importance of the activities to be included. In general, separate classes are provided for activities that are prevalent in most EU countries, or that are of particular importance in the world economy. To attain international comparability, certain classes have been introduced in the structures of ISIC and, therefore, included in NACE.

Criteria for groups and divisions
44. Unlike for classes, the actual production process and technology used in production activities become less important as a criterion for grouping them at more aggregated levels. At the highest level (sections), the general characteristics of the goods and services produced, as well as the potential use of the statistics, for instance in the SNA and ESA framework, become an important factor.

45. The main criteria applied in delineating groups and divisions of NACE concern the following characteristics of the activities of production units: n the character of the goods and services produced, n the uses to which the goods and services are put and n the inputs, the process and the technology of production.

46. In the case of the character of the goods and services produced, account is taken of the physical composition and stage of fabrication of the items and the needs served by them. Distinguishing categories of NACE in terms of the nature of goods and services produced provides the basis for grouping production units according to similarities in, and links between, the raw materials consumed and the sources of demand and markets for the items.

47. The weight assigned to the criteria described above varies from one category to another. In a number of instances (for example food manufacturing, the textile, clothing and leather industries, machinery and equipment manufacturing, as well as the service industries) the three specific aspects are so closely related that the problem of assigning weights to the criteria does not arise. In the case of intermediate products, the physical composition, as well as the stage of fabrication of the items, were often given the greatest weight. In the case of goods with complicated production processes, the end use, the technology and the organisation of production of the items are frequently given priority over the physical composition of the goods.

4.3 Steps for proposing new NACE codes

1. Initiation of revision and suggestions for changes (revision every 15 years)
   a. The revision is coordinated by Eurostat with aid of a task force.
   b. A consultation process takes place in order to determine which trends should be reflected by the NACE. In this consultation process NSIs, the European Commission DGs, commission services, European industry federations and the European System of Central Banks are asked to provide input.
2. Submission of proposed changes
   a. Proposals that Eurostat receives are sent to members of the Revision Task Force.
3. Evaluation of proposals and decision
   a. Evaluation steps:
   i. Internal EU consultation: sometimes topic experts are consulted on the proposals (for example, in the past researchers from the Joint Research Centre were consulted over a proposal for bio-based NACE codes).
   ii. The NACE Revision Task Force provides feedback and discusses controversial proposals in the Task Force meetings. The Task Force might also make recommendations for how to improve the proposals. The Task Force also revises the existing implementation manuals. 
   1. Feedback positive → proposal is accepted
   2. Feedback mixed → Eurostat decides or further discussion
   iii. The draft of the new NACE will be sent out for consultation in the second half of 2021.
   b. Evaluation criteria:
   i. Feasibility: can the codes be implemented in practice? The implementation of such codes should also be thought through and laid out in the proposals. For example: how is a company that produces bio-based and non-bio-based products registered? How do you determine whether a company is bio-based or not? Based on the feedstock, process or products?
   ii. Relevance: another important criterion in practice is the societal/policy relevance of the proposed code.
   iii. Volume: volume is also important, as small Member States might otherwise face confidentiality issues.
4. Publication and implementation
   a. Legal procedure: the time needed for the legal procedure will depend on the necessary impact assessment and EU decision procedure, which can only be defined when more concrete information is available on the changes envisaged.
   b. The latest revision of the NACE is expected to be implemented and come into force in 2024.

4.4 Interrelation with other codes

PRODCOM. The first four digits of the PRODCOM codes are taken directly from the NACE classification.

ISIC. The ISIC revision takes place simultaneously with the NACE revision. (https://unstats.un.org/unsd/classifications/Econ/isic). In this international revision the EU is also represented by Eurostat and two Member States. If proposals entail changes to the first two digits of the NACE, these have to be implemented on the international level by the UN in the ISIC. Changes decided internationally for the ISIC also need to be implemented in the PRODCOM. For example, the current ISIC revision was mandated by the UNSC in March 2021 and the revised ISIC is scheduled to be adopted by the UNSC in December 2022.

It is important that changes to the NACE and the EGSS (Environmental accounts on the Environmental goods and services sector) are aligned (e.g. through co-ordination between the task forces). For instance, if one classification provides an improved coverage for the circular economy, this should also be reflected in the other.

Sometimes Eurostat might decide to wait for the revision of CN codes and PRODCOM codes to follow their definitions.

4.5 Recommendations for proposing new NACE codes

If activities involving the production of bio-based materials and products were classified separately from non-bio-based activities on industry level via separate NACE codes, it would be easier to monitor the development of the bio-economy. However, in practice bio-based and non-bio-based products are often still produced in the same production facilities using similar processes which makes it more difficult to distinguish them and for companies to be allocated to either industry.

• Consider whether the proposed code actually represents a separate industry with separate production processes and facilities or whether these remain the same and it is merely the inputs that change. In the latter case it would make more sense to propose new codes at the product level.
• Consider and engage with industry, some sectors might be more open and receptive to such changes than others. If an industry is positive it strengthens the case for a new NACE code.
• It is crucial that proposals are very clear and introduce the topic and relevance, as Task Force members review proposals related to many different topics and are thus probably not experts in the field the new code relates to.
• Proposals should clearly indicate which structural changes or splits they aim at. (For example, name the code that should be added or describe which codes should be merged).
• Highlight codes from other classifications that are closely related to the proposed NACE code.

Statistical classifications generally follow relevant policy and societal trends. There are therefore opportunities to add statistical codes for bio-based products and materials to statistical classifications. The bio-based economy is a cross-cutting topic that is relevant for many materials and products. While it would be valuable to have all relevant products split into bio-based and non-bio-based versions, this does not seem realistic as the volumes of some bio-based products are small and the governing bodies aim to keep the number of codes in classifications relatively stable. A strong case needs to be made for why specific codes need to be added. Introducing new codes to classifications can be a lengthy, iterative process in which many stakeholders are involved. Therefore, this sections provides advice for those who seek to propose new codes to increase the chance of proposals being accepted.

This report examined specifically the NACE, CN and PRODCOM classifications. These classifications are used in different contexts. To identify the most suitable classification for a bio-based product or material, several questions should be asked: at what level is the bio-based product or material under consideration already relevant? Is it a product or a whole new production process and industry? Is it primarily imported or also made within the EU?

• New production process/industry with relevant financial volumes: NACE classification (revised every 15 years).
• Goods primarily imported with relevant financial volumes: CN classification (revised annually).
• Goods produced in relevant quantities in the EU: PRODCOM list (revised roughly every two years).

The following recommendations aim to aid proposers in selecting relevant products, writing clear proposals and increasing the likelihood of acceptance by involving affected stakeholders early on in the process.

For which products and materials should codes be proposed?

• Propose new codes for bio-based products and materials that are already in circulation on a large scale (volume and financial value).
• Codes that exist in one classification are easier to implement in another. An example is proposing a new PRODCOM code that matches an already existing CN code. Using the existing definition can speed up the process of approval as the code was already approved once and was meanwhile tested in practice.
• Only propose codes for products/ materials with small volumes if these are of extremely high societal or policy importance and/or rapidly growing in volume. Otherwise consider proposing these codes once they have reached a relevant volume.

What should be considered in the phrasing of proposals?

• Check whether related codes already exist in other classifications as existing definitions could simply be adopted. This also ensures consistency among classifications.
• Highlight the societal/policy relevance of the proposed codes avoiding complicated jargon.
• Clearly define the new codes and how they differ from existing codes. This is especially relevant as these codes might be used for future policy to stimulate the bio-based economy, such as reduced taxes or import duties on relevant goods.

Achieving acceptance of proposals?

Proposals that demonstrate that the codes can be implementable in practice  are more likely to be accepted. Thus, it is beneficial to consult and lobby relevant stakeholders while writing. Stakeholders can be European Commission DGs, other Member States or industry associations. For example, some codes might be difficult for smaller Member States to check or companies might be unable to report on them. Involving stakeholders while writing the proposal can help get them on board and ensure that the proposed codes can actually be reported on and checked in practice.

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European Commission, 2017. PRODCOM User Guide: Statistics on production of manufactured goods (PRODCOM). [Online] Available at: https://ec.europa.eu/Eurostat/documents/120432/4433294/europroms-user-guide.pdf/e2a31644-e6a2-4357-8f78-5fa1d7a09556 [Accessed: 10/03/2021].

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