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History of SIC / NAICS
The Standard Industrial Classification (SIC) was originally developed in the 1930′s to classify establishments by the type of activity in which they are primarily engaged and to promote the comparability of establishment data describing various facets of the U.S. economy.
The SIC covers the entire field of economic activities by defining industries in accordance with the composition and structure of the economy. Over the years, it was revised periodically to reflect the economy’s changing industry composition and organization. The Office of Management and Budget (OMB) last updated the SIC in 1987.
In recent years, rapid changes in both the U.S. and world economies brought the SIC under increasing criticism. The 1991 International Conference on the Classification of Economic Activities provided a forum for exploring the issues and for considering new approaches to classifying economic activity. In July 1992, the OMB established the Economic Classification Policy Committee chaired by the Bureau of Economic Analysis, U.S. Department of Commerce, with representatives from the Bureau of the Census, U.S. Department of Commerce, and the Bureau of Labor Statistics, U.S. Department of Labor. The OMB charged the ECPC with conducting a “fresh slate” examination of economic classifications for statistical purposes and determining the desirability of developing a new industry classification system for the United States based on a single economic concept. A March 31, 1993, Federal Register notice (pp. 16990-17004) announced OMB’s intention to revise the SIC for 1997, the establishment of the Economic Classification Policy Committee, and the process for revising the SIC.
The ECPC and Statistics Canada reviewed the existing structure of detailed “4-digit” industries in the 1987 U.S. SIC and the 1980 Canadian SIC for conformance to economic concepts.
Frequently Asked Questions
Q. – What is SIC?
The Standard Industrial Classification (SIC) system is a series of number codes that attempts to classify all business establishments by the types of products or services they make available. Establishments engaged in the same activity, whatever their size or type of ownership, are assigned the same SIC code. These definitions are important for standardization.
The SIC codes were developed to facilitate the collection, tabulation, and analysis of data and to promote comparability in statistical analyses. Despite drawbacks in the classifications, it is useful to have a code in hand when doing research. Most business directories and directory databases use the SIC codes to classify companies. The federal government uses the codes for particular data series; for example, the Census of Manufactures and the Census of Retail Trade.
Q. – What is NAICS?
Beginning in 1997, the SIC will be replaced by the North American Industry Classification System (NAICS). This six digit code is a major revision that not only provides for newer industries, but also reorganizes the categories on a production/process-oriented basis (SIC used a mixture of production-based and market-based categories).
The new NAICS system was developed jointly by the U.S. Census Bureau in with the U. S. Economic Classification Policy Committee, Statistics Canada and Mexico’s Institutio de Estadistica, Geografia e Informatics. This new, uniform, industry-wide classification system has been designed as the index for statistical reporting of all economic activities of the U.S., Canada, and Mexico.
- Common code between U.S., Mexico, and Canada.
- Compatible with 2-digit level of ISIC of the United Nations.
- More industries and distinctions.
- Emerging high-tech industries and service industries included.
- New Information Industry.
- New 6-digit codes instead of 4-digit as in SIC.
The NAICS hierarchical structure is:
XX Industry Sector (anticipating up to 20 industries)
XXX Industry Subsector
XXXX Industry Group
XXXXXX U.S.(Canadian, or Mexican) National Industry
Q. – What is the difference between NAICS and the 1980 Canadian SIC?
The NAICS hierarchy and coding system differs from the Canadian 1980 SIC in certain important respects. The first four levels of NAICS are designed for the production of comparable economic statistics by the three countries. At the fifth level, each country elaborates the national detail it requires for statistical purposes. Thus in contrast to the 1980 SIC, the grouping of industries in the hierarchy of NAICS and their delineation at the fifth level are no indication of their statistical importance in the Canadian economy.
Q. – Why does AMEinfo.com use a US classification system in the Middle East?
It was the most comprehensive overall industry classification system we could find when re-structuring our database in January 2005.
The main advantage of being compliant with a standard is that should a more comprehensive/applicable standard be made available mapping from one standard to another is relatively trivial.
Q. – How often will NAICS be revised?
Every five years. The first revision has already occurred. The code was revised in 2002 and is scheduled to revise again in 2007.
Q. – Why use NAICS and SIC?
Although the purpose behind the creation of the NAICS classification system is specifically for governmental regulations and census reports, this system can be implemented in any business to classify customers and enable users to gain a clear perspective on target markets. This is one of the most common uses of the NAICS and SIC in the general market.
For example, if your business sold equipment specific to dry cleaners it would be valuable to have a list of all the dry cleaners locally or nationally. To do this, you would look up the NAICS code specific to dry cleaners in the NAICS reference (such as the NAICS to SIC cross-reference tables), then using a business database (such as Power Business) you would get a list of all companies based on that code.
Whether it’s statistical analysis, market research, or sales leads NAICS and SIC codes provide a valuable tool to get the information needed to succeed.
Q. – Who uses NAICS and SIC?
The following are just a few examples of who:
- State and Federal agencies.
- Census Bureau, for economic census reports.
- Attorneys for filing required government documents.
- Mailing list publishers for classification.
- Banks for evaluating loan applications.
- Marketing agencies/departments for targeted marketing.
- Market researchers.
- Insurance companies for accessing risks.
- Job service agencies for assisting applicants seeking employment.
- City planning and zoning boards for monitoring compliance with zoning requirements.
- Environmental protection agencies for monitoring emissions.
- Power and utility companies for projecting usage needs.
- Publishers for soliciting advertisers based on classified readership.
- Trade associations.
- Business, for sorting non-statistical articles and reports on industry and products.
- Database producers for searching by industry.
- Many others.