Looking at the documentation here, I would expect that a component in Workflow higher in the BluePrint could not be localized at any lower level of the BluePrint.
However, I have a situation where this is possible. A component created at global content level, which is in an edit Workflow (not create), can be localized in the French content Publication.
Could this be a bug?
I would say it is a defect in documentation.
The shared item cannot be localized anywhere in the path that contains E. That is, it cannot be localized in A, C, E or F, but it can be localized in B or in D. Once localized, the localized item has none of the restrictions listed here anymore.
Content Manager prevents you from localization of "in-between" items, but not the items which are lower in Blueprint. So localization in F is valid.
If you have pubA->PubB->PubC->PubD setup and your workflow is running on shared item in pubC(so actually component in workflow is in pubA), you are not able to localize in pubB, because it will change owning publication for component in pubC and you will lose link between components in pubC and pubA.
But with localization in pubD you will not have this problem, so it is possible.
I hope my explanation will have at least a little sense for you. And you can take a look into following picture:
Yes, I think you can localise items lower down in the BluePrint (need to double check that but I believe I've seen it before), but I think you will be localising the last major version of the parent component, not the minor version which is in workflow.
