The Inventory Location is actually the existing locations in the system at the time the item is created. The reason why there is no item showing when you set the Inventory Location = Location XXX (sample new location) because there are no new items created after the creation of Location XXX.
If you will create a new item (with Location XXX already created in NetSuite), then go back to your search and set Inventory Location = Location XXX, the newly created item will show in the item search.
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