What Are The Principles Of SIC Code Classification?

In reviewing the Classification, the Technical Committee on Industrial Classification was guided by general principles. The following are the basic principles underlying the Standard Industrial Classification as described in the SIC Code Manual: 

  1. The classification is organized to reflect the structure of the U.S. economy. It does not follow any single principle, such as end use, nature of raw materials, product, or market structure.
  2. The unit classified is the establishment. An establishment is an economic unit that produces goods or services. For example, a farm, mine, factory, or store. In most instances, the establishment is at a single physical location and is engaged in one, or predominantly one, type of economic activity. An establishment is not necessarily identical with a company or enterprise.
  3. Each establishment is classified according to its primary activity. Primary activity is determined by identifying the predominant product or group of products produced or handled, or service rendered.
  4. An Industry (four-digit SIC) consists of a group of establishments primarily engaged in the same activity. To be recognized as an Industry, such a group of establishments must meet certain criteria of economic significance, as described in Section D (Executive Office of the President "1987:699)".
In addition, the U.S. Government specified in the SIC Code Manual that agencies could use additional subdivisions within specific four-digit industries to further break down industries.  This led to the creation and evolution of the 6,7, and 8 digit Extended SIC Codes that are in use today.