How do sections divisions groups and classes nest?

Sections, divisions, groups and classes nest as a hierarchy in which each level sits inside the level above it. The EUR-Lex summary states that NACE Rev. 2 update 1 comprises four levels, each identified by one letter for sections, two digits for divisions, three digits for groups, and four digits for classes. A path from section to class therefore narrows at each step, and it never branches sideways.

What is the nesting rule?

The nesting rule has two parts. First, a category at a lower level belongs to one, and only one, category at the level above. A class belongs to one group, a group belongs to one division, and a division belongs to one section. Second, the categories below a position together exhaust the scope of that position. The manual states that for each NACE position, its scope is required to be exhausted by the positions subordinated to it at the next more granular level. That is why categories with headings including the term other, or ending with n.e.c., meaning not elsewhere classified, have been introduced. The residual category gathers what the more specific categories below the same parent do not cover, so that the parent scope is complete.

The background article states the same idea in terms of granularity. NACE is a hierarchical classification, meaning that it is possible to use it at different levels of granularity, for broad overviews of wide sectors of the economy, as well as for very detailed summary at the level of highly specific activities. The hierarchy therefore serves two uses at once: a broad overview at section level, and a detailed breakdown at class level, with each level aggregating exactly to the level above.

Level	Identifier	Place in the nest
Section	One letter	Broadest grouping, contains divisions
Division	Two digits	Inside one section, contains groups
Group	Three digits	Inside one division, contains classes
Class	Four digits	Inside one group, most detailed level

How is a path followed from section to class?

A path is followed by narrowing. Start with the section letter, which names the broad area. Move to the division, whose two digit code narrows the section. Move to the group, whose three digit code narrows the division. Move to the class, whose four digit code narrows the group. The manual gives an example of the code form: the activity manufacture of liquid biofuels is identified by the code 20.51, where 20 is the code for the division, 20.5 is the code for the group, and 20.51 is the code of the class. The section letter, in that example section C, does not appear in the numeric code itself. The code shows the division, group and class, and the section must be found from the structure table that places the division inside its section.

Following a path in the other direction works the same way. A class code can be shortened to its group by dropping the final digit, and to its division by dropping the final two digits, because the codes are built by appending digits at each level. That shortening is a structural operation. It shows the parent category. It does not, on its own, show what the parent category includes and excludes, and it does not show whether the class is the right class for a particular activity. For those questions, the explanatory note for the class and for each parent level must be read.

What breaks the nesting pattern?

Two features look like breaks, and neither breaks the rule. The first is a level that is not split. Where a section is not split at all, there is one division, one group and one class, each with a heading identical to the section. Where a division is not split, the group and class have the same heading as the division, with codes formed by appending zero digits. The manual states that the sole current case of an unsplit section is section V. The pattern preserves the hierarchy even where no finer distinction is made, so that every position still has a place at every level.

The second feature is a gap in division numbering. Divisions are coded consecutively, but some division numbers have been left unused to allow additional divisions to be introduced without a complete change of coding. The manual lists the unused division numbers in NACE Rev. 2.1 as 04, 34, 40, 44, 45, 48, 54, 57, 67, 76, 83 and 89. A gap is therefore an empty place in the numbering, not a missing level. The hierarchy still nests, and the gap simply reserves a number for a future division in a section where one is most likely to be needed.

What does nesting not decide?

Nesting does not decide which class describes a particular activity, and it does not decide the entry for a specific business. The hierarchy shows where a category sits. The explanatory notes state what the category contains. The classification rules in the introductory guidelines state how a unit with several activities is assigned to a single class for statistical purposes. The institute or register that holds the record applies those rules to the information it holds. A reader who follows a path correctly has found a place in the structure. That reader has not yet confirmed an entry, and must not treat the path as a determination.

Read the structure table in the manual to see the nest, read the explanatory note for the category at the end of the path, and confirm any entry with the national statistical institute or the business register that holds the record.