(a) Appropriate congressional committees defined

In this section, the term “appropriate congressional committees” means—

(1) the Committee on Foreign Relations of the Senate;

(2) the Committee on Armed Services of the Senate;

(3) the Committee on Appropriations of the Senate;

(4) the Committee on Foreign Affairs of the House of Representatives;

(5) the Committee on Armed Services of the House of Representatives; and

(6) the Committee on Appropriations of the House of Representatives.

(b) Taiwan security programs

The Secretary of State, in consultation with the Secretary of Defense, shall use the authorities under this section to strengthen the United States-Taiwan defense relationship, and to support the acceleration of the modernization of Taiwan’s defense capabilities, consistent with the Taiwan Relations Act (Public Law 96-8) [22 U.S.C. 3301 et seq.].

(c) Purpose

In addition to the purposes otherwise authorized for Foreign Military Financing programs under the Arms Export Control Act (22 U.S.C. 2751 et seq.), a purpose of the Foreign Military Financing Program should be to provide assistance, including equipment, training, and other support, to build the civilian and defensive military capabilities of Taiwan—

(1) to accelerate the modernization of capabilities that will enable Taiwan to delay, degrade, and deny attempts by People’s Liberation Army forces—

(A) to conduct coercive or grey zone activities;

(B) to blockade Taiwan; or

(C) to secure a lodgment on any islands administered by Taiwan and expand or otherwise use such lodgment to seize control of a population center or other key territory in Taiwan; and

(2) to prevent the People’s Republic of China from decapitating, seizing control of, or otherwise neutralizing or rendering ineffective Taiwan’s civilian and defense leadership.

(d) Regional contingency stockpile

Of the amounts authorized to be appropriated pursuant to subsection (h), not more than $100,000,000 may be used during each of the fiscal years 2023 through 2032 to maintain a stockpile (if established pursuant to section 3352 of this title), in accordance with section 2321h of this title.

(e) Availability of funds

(1) Annual spending plan

Not later than March 1, 2023, and annually thereafter, the Secretary of State, in coordination with the Secretary of Defense, shall submit a plan to the appropriate congressional committees describing how amounts authorized to be appropriated pursuant to subsection (h), if made available, would be used to achieve the purpose described in subsection (c).

(2) Certification

(A) In general

Amounts authorized to be appropriated for each fiscal year pursuant to subsection (h) are authorized to be made available after the Secretary of State, in coordination with the Secretary of Defense, certifies not less than annually to the appropriate committees of Congress that Taiwan has increased its defense spending relative to Taiwan’s defense spending in its prior fiscal year, which includes support for an asymmetric strategy, excepting accounts in Taiwan’s defense budget related to personnel expenditures, (other than military training and education and any funding related to the All-Out Defense Mobilization Agency).

(B) Waiver

The Secretary of State may waive the certification requirement under subparagraph (A) if the Secretary, in consultation with the Secretary of Defense, certifies to the appropriate congressional committees that for any given year—

(i) Taiwan is unable to increase its defense spending relative to its defense spending in its prior fiscal year due to severe hardship; and

(ii) making available the amounts authorized under subparagraph (A) is in the national interests of the United States.

(3) Remaining funds

Amounts authorized to be appropriated for a fiscal year pursuant to subsection (h) that are not obligated and expended during such fiscal year shall be added to the amount that may be used for Foreign Military Financing to Taiwan in the subsequent fiscal year.

(f) Annual report on advancing the defense of Taiwan

(1) Initial report

Concurrently with the first certification required under subsection (e)(2), the Secretary of State and the Secretary of Defense shall jointly submit a report to the appropriate congressional committees that describes steps taken to enhance the United States-Taiwan defense relationship and Taiwan’s modernization of its defense capabilities.

(2) Matters to be included

Each report required under paragraph (1) shall include—

(A) an assessment of the commitment of Taiwan to implement a military strategy that will deter and, if necessary, defeat military aggression by the People’s Republic of China, including the steps that Taiwan has taken and the steps that Taiwan has not taken towards such implementation;

(B) an assessment of the efforts of Taiwan to acquire and employ within its forces counterintervention capabilities, including—

(i) long-range precision fires;

(ii) integrated air and missile defense systems;

(iii) anti-ship cruise missiles;

(iv) land-attack cruise missiles;

(v) coastal defense;

(vi) anti-armor;

(vii) undersea warfare, including manned and unmanned systems;

(viii) survivable swarming maritime assets;

(ix) manned and unmanned aerial systems;

(x) mining and countermining capabilities;

(xi) intelligence, surveillance, and reconnaissance capabilities;

(xii) command and control systems;

(xiii) defensive cybersecurity capabilities; and

(xiv) any other defense capabilities that the United States determines, including jointly with Taiwan, are crucial to the defense of Taiwan, consistent with the joint consultative mechanism with Taiwan created pursuant to section 3355 of this title;

(C) an evaluation of the balance between conventional and counter intervention capabilities in the defense force of Taiwan as of the date on which the report is submitted;

(D) an assessment of steps taken by Taiwan to enhance the overall readiness of its defense forces, including—

(i) the extent to which Taiwan is requiring and providing regular and relevant training to such forces;

(ii) the extent to which such training is realistic to the security environment that Taiwan faces; and

(iii) the sufficiency of the financial and budgetary resources Taiwan is putting toward readiness of such forces;

(E) an assessment of steps taken by Taiwan to ensure that the Taiwan’s reserve forces and All-Out Defense Mobilization Agency can recruit, train, equip, and mobilize its forces;

(F) an evaluation of—

(i) the severity of manpower shortages in the military of Taiwan, including in the reserve forces;

(ii) the impact of such shortages in the event of a conflict scenario; and

(iii) the efforts made by Taiwan to address such shortages;

(G) an assessment of the efforts made by Taiwan to boost its civilian defenses, including any informational campaigns to raise awareness among the population of Taiwan of the risks Taiwan faces;

(H) an assessment of the efforts made by Taiwan to secure its critical infrastructure, including in transportation, telecommunications networks, satellite communications, and energy;

(I) an assessment of the efforts made by Taiwan to enhance its cybersecurity, including the security and survivability of official civilian and military networks;

(J) an assessment of the efforts made by Taiwan to improve the image and prestige of its defense forces among the population of Taiwan;

(K) an assessment of any significant gaps in any of the matters described in subparagraphs (A) through (J) with respect to which the United States assesses that additional action is needed;

(L) a description of cooperative efforts between the United States and Taiwan on the matters described in subparagraphs (A) through (K); and

(M) a description of any challenge in Taiwan to—

(i) implement the matters described in subparagraphs (A) through (J); or

(ii) United States support or engagement with regard to such matters.

(3) Subsequent reports

Concurrently with subsequent certifications required under subsection (e)(2), the Secretary of State and the Secretary of Defense shall jointly submit updates to the initial report required under paragraph (1) that provides a description of changes and developments that occurred in the prior year.

(4) Form

The reports required under paragraphs (1) and (3) shall be submitted in an unclassified form, but may contain a classified annex.

(5) Sharing of summary

The Secretary of State and the Secretary of Defense shall jointly share any unclassified portions of the reports, pursuant to paragraph (4), with Taiwan, as appropriate.

(g) Foreign military financing loan and loan guarantee authority

(1) Direct loans

(A) In general

Notwithstanding section 23(c)(1) of the Arms Export Control Act (22 U.S.C. 2763), during fiscal years 2023 through 2027, the Secretary of State is authorized to make direct loans available for Taiwan pursuant to section 23 of such Act.

(B) Maximum obligations

Gross obligations for the principal amounts of loans authorized under subparagraph (A) may not exceed $2,000,000,000.

(C) Source of funds

(i) Defined term

In this subparagraph, the term “cost”—

(I) has the meaning given such term in section 661a(5) of title 2;

(II) shall include the cost of modifying a loan authorized under subparagraph (A); and

(III) may include the costs of selling, reducing, or cancelling any amounts owed to the United States or to any agency of the United States.

(ii) In general

Amounts authorized to be appropriated pursuant to subsection (g) may be made available to pay for the cost of loans authorized under subparagraph (A).

(D) Fees authorized

(i) In general

The Government of the United States may charge processing and origination fees for a loan made pursuant to subparagraph (A), not to exceed the cost to the Government of making such loan, which shall be collected from borrowers through a financing account (as defined in section 661a(7) of title 2).

(ii) Limitation on fee payments

Amounts made available under any appropriations Act for any fiscal year may not be used to pay any fees associated with a loan authorized under subparagraph (A).

(E) Repayment

Loans made pursuant to subparagraph (A) shall be repaid not later than 12 years after the loan is received by the borrower, including a grace period of not more than 1 year on repayment of principal.

(F) Interest

(i) In general

Notwithstanding section 23(c)(1) of the Arms Export Control Act (22 U.S.C. 2763(c)(1)), interest for loans made pursuant to subparagraph (A) may be charged at a rate determined by the Secretary of State, except that such rate may not be less than the prevailing interest rate on marketable Treasury securities of similar maturity.

(ii) Treatment of loan amounts used to pay interest

Amounts made available under this paragraph for interest costs shall not be considered assistance for the purposes of any statutory limitation on assistance to a country.

(2) Loan guarantees

(A) In general

Amounts authorized to be appropriated pursuant to subsection (g) may be made available for the costs of loan guarantees for Taiwan under section 24 of the Arms Export Control Act (22 U.S.C. 2764) for Taiwan to subsidize gross obligations for the principal amount of commercial loans and total loan principal, any part of which may be guaranteed, not to exceed $2,000,000,000.

(B) Maximum amounts

A loan guarantee authorized under subparagraph (A)—

(i) may not guarantee a loan that exceeds $2,000,000,000; and

(ii) may not exceed 80 percent of the loan principal with respect to any single borrower.

(C) Subordination

Any loan guaranteed pursuant to subparagraph (A) may not be subordinated to—

(i) another debt contracted by the borrower; or

(ii) any other claims against the borrower in the case of default.

(D) Repayment

Repayment in United States dollars of any loan guaranteed under this paragraph shall be required not later than 12 years after the loan agreement is signed.

(E) Fees

Notwithstanding section 24 of the Arms Export Control Act (22 U.S.C. 2764), the Government of the United States may charge processing and origination fees for a loan guarantee authorized under subparagraph (A), not to exceed the cost to the Government of such loan guarantee, which shall be collected from borrowers, or from third parties on behalf of such borrowers, through a financing account (as defined in section 661a(7) of title 2).

(F) Treatments of loan guarantees

Amounts made available under this paragraph for the costs of loan guarantees authorized under subparagraph (A) shall not be considered assistance for the purposes of any statutory limitation on assistance to a country.

(3) Notification requirement

Amounts authorized to be appropriated to carry out this subsection may not be expended without prior notification of the appropriate committees of Congress.

(h) Authorization of appropriations

(1) Authorization of appropriations

In addition to amounts otherwise authorized to be appropriated for Foreign Military Financing, there is authorized to be appropriated to the Department of State for Taiwan Foreign Military Finance grant assistance up to $2,000,000,000 for each of the fiscal years 2023 through 2027.

(2) Training and education

Of the amounts authorized to be appropriated under paragraph (1), the Secretary of State should use not less than $2,000,000 per fiscal year for one or more blanket order Foreign Military Financing training programs related to the defense needs of Taiwan.

(3) Direct commercial contracting

The Secretary of State may use amounts authorized to be appropriated under paragraph (1) for the procurement of defense articles, defense services, or design and construction services that are not sold by the United States Government under the Arms Export Control Act (22 U.S.C. 2751 et seq.).

(4) Procurement in Taiwan

Of the amounts authorized to be appropriated for Foreign Military Financing and made available for Taiwan, not more than 15 percent of the amount made available for each fiscal year may be available for the procurement by Taiwan in Taiwan of defense articles and defense services, including research and development, as agreed by the United States and Taiwan.

(i) Sunset provision

Assistance may not be provided under this section after September 30, 2032.