To my knowledge this simple Classification field is not used anywhere in the system. I had a look in demo data and found it universally blank. I had a look in Substitute Items and in Co/By Products but do not see the field. I am 90% certain the field is appears on no form. If you check with JDE Customer Support they will probably tell you it is reserved for "future use". It is worth checking.
I don't think it has anything to do with either Intermediates or Repetitive Manufacturing.