To create a Merchant Fulfilled (MFN) listing in PREP & SHIP, select "Batch (Private) Listing" Under PREP & SHIP in the main menu.
You will see that "List FBA" is deselected, as illustrated here, as Batch (Private) Listing ONLY supports listing MFN:
Select "New Batch"
With a new batch created, you may add items on one of these ways:
Once items have been added to the batch, select "Create Listings" to create your Merchant-Fulfilled listings: