formal rulemaking
Formal rulemaking is a process through which administrative agencies make administrative rules. An administrative agency must adhere to heightened procedural requirements set out in the Administrative Procedure Act (APA) when engaged in formal rulemaking.
When Formal Rulemaking Requirements Apply
The APA, specifically 5 U.S.C. §§ 553(a),(b),(d),(e), 556, and 557, governs the formal rulemaking procedure. Section 553 requires that “[w]hen rules are required by statute to be made on the record after opportunity for an agency hearing,” then the formal rulemaking procedural requirements in sections 556 and 557 apply. That is, a statute delegating to the agency regulatory power must state that rulemaking under the statute be on the record after the opportunity for a hearing to trigger the formal rulemaking requirements. The U.S. Supreme Court in United States v. Florida East Coast Railway, 410 U.S. 224 (1973), narrowly interpreted § 553 to require a formal rulemaking proceeding only when the statute expressly states that rulemaking must take place “on the record.”
Procedural Requirements for Formal Rulemaking
When the statute triggers a formal rulemaking proceeding, the proceeding resembles an adjudication because an administrative law judge receives evidence in adversary proceedings. Section 551 clarifies that the difference between rulemaking and adjudication is that “rule making means the agency process for formulating, amending, or repealing a rule,” while adjudication is the formulation of an order, which is a “final disposition . . . of an agency in a matter other than rule making.” That is, rulemaking goes beyond resolution of specific controversies between parties and includes management and administrative functions.
In a formal rulemaking, an agency must give notice of the proposed rulemaking in accordance with § 553. In the formal rulemaking process, § 556 lays out how the agency shall appoint an administrative law judge who has the power to administer oaths, take evidence, regulate the course of the hearing, and, among other functions, make or recommend decisions. Lastly, § 557 describes how the agency creates the final decision, and how interested parties may submit their input. The decision of the judge becomes a final rule, codified in the Code of Federal Regulations.
[Last reviewed in November of 2021 by the Wex Definitions Team]
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