add_filter only for front office

Just wrap it all in an ! is_admin() check:

add_filter( 'wp_setup_nav_menu_item','decorate_mobile_menu' );
function decorate_mobile_menu($item) {
    if ( ! is_admin() ) {
        if ( strpos($item->title, 'SHIPPING') !== false) {  
            $split = explode(" IN ", $item->title);     
            $item->title="<span class="shipping-menu-item">" . $split[0] . ' IN </span>';
            $item->title .= '<br/>';
            $item->title .= '<span class="shipping-menu-item">' . $split[1] . '</span>';
        }
    }

    return $item;
}

is_admin() returns false if you’re viewing the front-end and true if you’re viewing the admin area.