Incoterms 2020. 11 terms — who bears cost & risk at each stage.
Incoterms 2020 are 11 standard trade terms that state who bears cost, risk and responsibility at each stage of an international shipment. Risk passes from seller to buyer at a different point under each term: at the seller's premises under EXW, on board the vessel under FOB, and at the named destination under DAP and DDP.
Where does risk pass from seller to buyer?
Risk passes at a different point under each of the 11 terms, from the seller's premises under EXW to the named destination under DAP and DDP. Click any term to expand a detailed breakdown. The bar shows where responsibility shifts from seller (green) to buyer (amber).
How do the 11 terms compare?
The matrix shows, for each of the 11 terms, whether the seller or the buyer handles export customs, carriage, loading, main transport, insurance, unloading, import customs and delivery, and where risk transfers.
| Term | Mode | Export Customs | Carriage to Port | Loading | Main Transport | Insurance | Unloading | Import Customs | Delivery to Dest. | Risk Transfers |
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Why do Incoterms matter in construction procurement?
Incoterms decide who pays for ocean freight, customs duties and inland delivery to the job site, and who carries the risk if a shipment is delayed or damaged. For general contractors and subcontractors sourcing materials globally, understanding Incoterms can significantly impact project budgets and timelines.
International Material Sourcing
Steel, structural lumber, specialty concrete additives, and fabricated components are increasingly sourced across borders. The chosen Incoterm determines who pays for ocean freight, customs duties, and inland delivery to the job site — and who carries the risk if a shipment is delayed or damaged.
Tariff & Duty Exposure
With construction material tariffs evolving rapidly in 2026, the Incoterm you negotiate determines who absorbs tariff increases. A DDP agreement puts all duty risk on the supplier; an EXW deal puts it squarely on the contractor. Getting this right can swing material costs. See our Material Price Tracking guide.
Budget Accuracy
Misunderstanding an Incoterm can leave tens of thousands of dollars in freight, insurance, or duty costs off your estimate. Trueleveler is an AI-supported project operations platform for construction — 28 AI engines that do the paperwork. It levels your bids, drafts your RFQs and RFIs, reviews change orders and pay apps, and writes daily logs and meeting minutes — so every cost component is captured and compared accurately.
Logistics & Schedule Risk
Construction projects live or die by their schedules. Knowing exactly where risk transfers — and having contingency plans for each handoff point — helps project managers avoid costly delays when material shipments encounter port congestion or customs holds.
Subcontract Negotiations
When leveling bids from multiple subcontractors or material suppliers, the Incoterm basis of each quote must be normalized. A lower FOB price might actually cost more than a higher CIF price once you add freight and insurance. Use our Bid Templates to compare bids across different Incoterm bases.
Insurance & Claims
Under CIP and CIF, the seller must provide insurance — but the coverage level differs. CIP requires “all risks” coverage (Institute Cargo Clause A), while CIF only requires minimum coverage (Clause C). For high-value materials, see our Construction Insurance Guide.
How do you negotiate Incoterms?
Match the term to your project risk profile and market conditions: push for DDP when tariffs are volatile, consider EXW when you have your own logistics, and check that a quoted term matches the service actually provided. Three tactical patterns follow.
When to Push for DDP
During periods of tariff volatility, DDP shifts all duty risk to the supplier. Especially valuable when tariff rates are uncertain or expected to increase. Note: sellers assume legal responsibility for import compliance under DDP — which can be risky in some jurisdictions. Factor this into negotiations.
When EXW Saves Money
If you have large volumes and your own logistics infrastructure, EXW gives you maximum control over shipping and can reduce costs significantly. Best for firms with established freight forwarding relationships and customs brokerage capabilities.
Red Flags to Watch
Be cautious when a seller insists on FAS but prices at FOB levels, or when DDP quotes seem too low (likely missing duty calculations). Always verify that the quoted Incoterm matches the actual service being provided.
Frequentlyasked questions.
Quick answers to the questions procurement teams ask most about Incoterms 2020.
Which Incoterm is best for importing construction materials?
What changed between Incoterms 2010 and 2020?
Can I use FOB for containerized shipments?
Who pays customs duties under DAP?
Related guides.
Related articles.
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- Incoterms 2020International Chamber of CommerceThe ICC page for the 11 Incoterms rules that divide delivery, cost and risk between buyer and seller.
- Know Your IncotermsU.S. International Trade AdministrationA U.S. government guide to what the Incoterms mean for sellers and buyers in an export sale.