In RQ04 on the Requisition Center tab, there's a section called Item List Specific Fields. If the List only Internal Items flag is set to I (IC12 Setup) they will have to change the From Location on their Detail Profile tab in RQC to order an item that is built exclusively in a location different from their default From Location. If they don't change it the item won't come up in Search Catalog or appear on any templates. If they attempt to order using Express they'll get this message.
You could set to this to Y but then the requester would only be able to see inventory tracked items at their From Location. For us, setting the flag as I makes more sense because we have stock and nonstocks built in IC12.