Location &1 (&2) not found (BSG &3)

What causes this issue?

When attempting to assign a location of the type <ZH>customer</> or
<ZH>vendor<ZH> to a transportation zone, the system was unable to find
the latter either in the database or amongst the newly transferred
data.

System Response

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

How to fix this error?

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.