SIC Code (SIC)

Definition

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.

OECD/Regulatory Reference

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.

In Practice

SIC Code Structure:

Common SIC Codes in Transfer Pricing:

Example

Tested Party: US contract manufacturer of electronic components

SIC Code Selection:

Search Strategy:

SIC vs. NACE Comparison

Related Terms

• NACE Code — European industry classification
• Quantitative Screening — Process using SIC codes
• Comparable Companies — Entities selected using SIC codes

Further Reading

• Benchmarking Study Guide — Industry screening methodology

Frequently Asked Questions

Is SIC still used or has it been replaced?

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.

How do I convert between SIC and NACE codes?

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.

Should I use multiple SIC codes in my search?

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.

What if my tested party's SIC code is wrong in the database?

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.

How specific should my SIC code selection be?

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.

Do different databases use different SIC code versions?

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.

Are SIC codes acceptable for non-US benchmarking studies?

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.