Element require the definition of a local coordinates system so that quantities such as mass and stiffness matrices as well as force vectors can be transformed into global coordinates. The local axis computation is done internally on each element. The local axis definition depends on the element, and they are encapsulated into two categories: Line and Area local axis.

For LINE elements such as lin3DTruss2 and lin3DFrame2, the local axis 1 is always the longitudinal axis of the element, the positive direction being from Node (1) to (2). This axis is always located at the centroid of the cross section. The default orientation of the local 2- and 3-axes is determined by the relationship between the local $1$-axis and the global Z-axis. The local 1-2 plane is taken to be vertical i.e., parallel to Z. The local 2-axis is taken to have upward +Z sense unless the element is vertical, in which the case the local 2-axis is taken to be horizontal along the global +X axis. The local 3-axis is horizontal, i.e., lies in the X-Y plane. This convention is explained in further details in next Figure for the case of a inclined element and a vertical element.

For AREA elements such as lin3DShell4, the local axis 3 is always normal to the plane of the shell element, the positive direction being from Node (1) to (4) counterclockwise. The default orientation of the local 1- and 2-axes is determined by the relationship between the local 3-axis and the global Z-axis. The local 2-3 plane is taken to be vertical i.e., parallel to Z. The local 2-axis is taken to have upward +Z sense unless the element is horizontal, in which the case the local 2-axis is taken to be along the global +Y axis. The local 1-axis is horizontal, i.e., lies in the X-Y plane. This convention is explained in further details in next Figure for the case of a inclined element and a vertical element.

REFERENCES:

SAP2000, "CSI Analysis Reference Manual", Chapter VII: The Frame Element, Local Coordinate System, Default Orientation, page 108-110.
SAP2000, "CSI Analysis Reference Manual", Chapter X: The Shell Element, Local Coordinate System, Default Orientation, page 185-186.