Remember this?
I might have figured it out.
Everyone forgets that the 40x46mmSR illum rounds have a black powder ejector charge. ATF has been hard on black powder transportation and storage for a couple of years now.
This seizure could simply be sellers being unaware of the new regs and getting nailed for it.
I also wonder if the official specifications for M9 flake powder used in the rounds is technically an explosive as well. I notice that nobody seems to carry it and there's lots of information for using common smokeless powders for reloading rounds.
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