&1 &2: item category (&3) not allowed. &4

What causes this issue?

Item category &V3& is not allowed for item &V2&. The item has been
created referencing another document. This means that the item
categories possible are limited.
When an item is created referencing a shipping notification, an item
category must be selected that only allows goods to be moved between
distribution centers and stores (that is, generation of warehouse
orders and deliveries as follow-on documents), and does not allow
purchase orders to be generated for external vendors.

System Response

The system does not include reference document items in the allocation
table if:
a promotion number is maintained in the reference document item
the reference document item contains a material that is a variant
referencing a generic material (higher-level item)
Otherwise the reference document item is adopted in the allocation
table. The item category can be changed in the allocation table.

How to fix this error?

Select a valid item category.

Error message extract from SAP system. Copyright SAP SE.