A U.S. company would invest in export credit insurance when it:

• A. wants to protect itself against the risk of nonpayment by foreign buyers
• B. plans to insure its goods against physical damage during shipping
• C. intends to avoid paying tariffs on imported goods
• D. is seeking to reduce domestic transportation costs

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the purpose of export credit insurance. Export credit insurance is designed to protect exporters against the risk that foreign buyers may fail to pay for goods or services delivered.
2. Step 2: Identify the risk that the U.S. company wants to mitigate. In this case, the risk is nonpayment by foreign buyers, which can lead to financial losses for the exporter.
3. Step 3: Differentiate export credit insurance from other types of insurance. For example, insurance against physical damage during shipping is typically covered by marine or cargo insurance, not export credit insurance.
4. Step 4: Recognize that export credit insurance does not cover tariffs or domestic transportation costs. Tariffs are taxes on imports, and domestic transportation costs are unrelated to export credit risks.
5. Step 5: Conclude that a U.S. company would invest in export credit insurance specifically to protect itself against the risk of nonpayment by foreign buyers.