400A Service from Shop to Home

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They are under the understanding that your reference for next size up with be for brand circuits, not a service entrance conductor.

That is incorrect unless there is a local amendment to the NEC. The next size up rule can be applied to branch circuits, feeders, and service conductors. Around here a typical 200 amp service is usually #4/0 Al SE cable.

 

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They are under the understanding that your reference for next size up with be for brand circuits, not a service entrance conductor.

230.90(A) Exception #2 makes it clear that 240.4(B) applies to service conductors.