1) Click on 'Manage Inventory' under the 'Inventory' heading in the Control Panel menu. 

2) Use 'Find by ID' or 'Keyword Search' textbox to find the Item. (Or you can use 'filter' icon next to keyword search textbox for 'Advanced Search')

3) Click the 'Edit' icon at the end of your item to go to it's settings page.

4) On the 'DETAILS' tab, turn on the toggle switch for 'Ship Exempt'.

5) When you are finished editing your item, be sure to click the 'Save' button at the top to finalize.