Your shipping location settings for the listing only control whether someone can pay (and of course, how much) at checkout (they must specify a shipping address in a location you have set up to ship to). By itself it does not prevent anyone from bidding or committing to buy your item. (And I have no idea where the notion comes from that you would have to set up Exclusions to a place you don't want to ship to except to override the settings of where you DO ship to (e.g. exclude PO boxes, AK, HI, PR and/or the various territories from US shipping, or Mexico from North America, or Nigeria from Africa), or where the Global Shipping Program contractor will ship it to if you are enrolled in the GSP.)
What keeps someone from bidding/offering/committing to buy is to set up your Buyer Requirements to block anyone with a primary shipping address in a location you don't ship to. (Note that this only applies to the primary shipping address, not the registration address that you might see on the buyer's profile, so don't think it isn't working when you get a bid etc. from someone registered elsewhere--it is legitimate for a buyer to use a domestic forwarding service or friend or relative to receive the package and ship it on, your duty ends when the package is delivered to the given shipping address as described and forwarding it or shipping it on voids the Money Back Guarantee). Go to the Site Map (link at the bottom of this and most ebay.com pages) Sell Section (use the shortcut at the top--it's a long scroll down) and you'll find the link to that and several other useful seller tools; confusingly the link to this is the one to your Blocked Bidder/Buyer List which actually leads to an instruction page with several links to bidder management tools, and in the last reformat of that page they added the actual Buyer Requirements settings down at the bottom.
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