Quick Definition
SIC Code (SIC) — SIC Code (Standard Industrial Classification) is a four digit numerical code system used to classify businesses by their primary economic activity.
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SIC Code (Standard Industrial Classification) is a four-digit numerical code system used to classify businesses by their primary economic activity. Developed by the US government in the 1930s, SIC codes are the traditional industry classification system in US databases and filings. In transfer pricing, SIC codes filter comparable company searches to identify businesses in the same or similar industries as the tested party.
While largely replaced by NAICS in US government statistics, SIC codes remain widely used in commercial databases and transfer pricing analysis.
The OECD Transfer Pricing Guidelines (2022) don't prescribe specific classification systems but require that comparables be in the same or similar industry in Chapter I. The Guidelines note that the industry in which the tested party and comparables operate may affect the comparison.
US-based databases (Compustat, OneSource) primarily use SIC codes, while European databases (Orbis, Amadeus) use NACE codes. For US transfer pricing analyses, SIC codes are the standard industry filter.
SIC Code Structure:
| Level | Digits | Example | Description |
|---|---|---|---|
| Division | Letter | D | Manufacturing |
| Major Group | 2-digit | 36 | Electronic equipment |
| Industry Group | 3-digit | 367 | Electronic components |
| Industry | 4-digit | 3672 | Printed circuit boards |
Common SIC Codes in Transfer Pricing:
| Tested Party Type | Relevant SIC Codes |
|---|---|
| Wholesale distribution | 5000-5199 |
| Manufacturing (general) | 2000-3999 |
| Electronics manufacturing | 3600-3699 |
| Business services | 7300-7389 |
| Computer services | 7370-7379 |
| Management consulting | 8742 |
SIC vs. NACE: For US companies and Compustat searches, use SIC codes. For European companies and Orbis/Amadeus searches, use NACE codes. Correspondence tables exist to translate between systems, though mappings aren't always exact.
Tested Party: US contract manufacturer of electronic components
SIC Code Selection:
| Code | Description | Appropriateness |
|---|---|---|
| 3672 | Printed circuit boards | ✅ If tested party makes PCBs |
| 3679 | Electronic components, NEC | ✅ Broad electronic components |
| 3825 | Instruments for measurement | ⚠️ Related but different function |
| 5065 | Electronic parts wholesale | ❌ Distribution, not manufacturing |
Search Strategy:
| Aspect | SIC (US) | NACE (EU) |
|---|---|---|
| Origin | US government (1930s) | European Union |
| Structure | 4-digit | 4-digit hierarchical |
| Current Status | Largely replaced by NAICS | Current standard |
| Database Use | Compustat, OneSource | Orbis, Amadeus |
| TP Application | US-focused analyses | EU-focused analyses |
SIC has been officially replaced by NAICS (North American Industry Classification System) in US government statistics since 1997. However, commercial databases still use SIC extensively, particularly for historical data and international comparisons. For transfer pricing purposes, SIC remains relevant and widely used.
Use correspondence tables published by Eurostat and the US Census Bureau. These provide mappings between classification systems. However, mappings aren't always one-to-one—some SIC codes map to multiple NACE codes and vice versa. Verify that converted codes accurately describe your tested party's activities.
Yes, often. Start with the most specific 4-digit code, then consider expanding to related codes if results are insufficient. For example, if SIC 3672 (printed circuit boards) yields few results, expand to SIC 3670-3679 (all electronic components) while maintaining functional relevance.
Verify through manual screening. Companies self-report or are assigned SIC codes that may not reflect actual activities. A company coded as "wholesale distribution" might actually manufacture. Always review business descriptions during manual screening rather than relying solely on SIC codes.
Balance specificity with sample size. Four-digit codes provide the closest match but may yield few results. Three-digit codes (major groups) are broader but risk including less comparable entities. Start narrow and expand if needed—documenting your rationale.
Yes, potentially. SIC has been revised several times (1987 being the major revision). Most databases use 1987 SIC codes, but some older data may use earlier versions. When working across databases, verify code definitions match.
SIC codes can be used for US comparable searches regardless of where the tested party is located. For non-US tested parties, you might search both US databases (using SIC) and regional databases (using NACE) to maximize comparable coverage.