The ATF reclassified wetted nitrocellulose as a high explosive in June 2016.
The decision is not final, as the ATF has rescinded their determination pending industry input.
Nitrocellulose is a chemical compound formed when cellulose, an organic polymer found in cotton fiber and wood, is "nitrated" by exposure to nitric acid or a similar agent. It's explosive and highly flammable, so in addition to being used to produce the first man-made plastic and celluloid photographic film in the 1800s, nitrocellulose became a key ingredient in the manufacture of ammunition. Since it's hazardous to store and transport, it's usually dampened with water, alcohol, or other liquid to make it more stable (at which point it's referred to as wetted nitrocellulose) then dried as needed for use.
Alarms were raised by firearms manufacturers and gun rights advocates in mid-2016 when the Bureau of Alcohol, Tobacco and Firearms (ATF) announced the reclassification of wetted nitrocellulose from "nonexplosive" to "high explosive":
We are aware that the U.S. Department of Transportation may assign a nonexplosive classification to nitrocellulose when it has been wetted with water or alcohol. This is based, in part, on the diminished likelihood of explosion in a transportation accident. Because the nitrocellulose retains its explosive characteristics when the water or alcohol is removed, the wetted nitrocellulose remains a nitrocellulose explosive, subject to the licensing, safety and security requirements of the Federal explosives regulations. However, based upon the diminished likelihood of wetted nitrocellulose exploding, ATF will consider variance requests to store the wetted material under an alternative arrangement.
This prompted the usual cries of "backdoor ammo ban" from gun rights advocates, as well as objections by ammunition manufacturers that the announcement came with no warning and little guidance, posing problems for the industry:
ATF’s sudden and unexpected change in policy on wetted nitrocellulose will likely have a significant impact on industry’s ability to deliver products to the military and commercial markets. Industry members have relied on the exemption for wetted nitrocellulose for many years and are aware of no accidental detonations or diversion of this product into illicit channels. Consequently, it is unclear why ATF believed it necessary to change its policy and, more importantly, why ATF announced the change in a newsletter article with no advance notice to industry.
This, in turn, prompted ATF to reconsider the decision and, at least for the time being, rescind its July ruling in order to solicit and consider industry input. This addendum to the June 2016 announcement spells out where the issue stands as of 31 August 2016:
ATF’s June 2016 Explosives Industry Newsletter included a brief discussion of Nitrocellulose, and attempted to clarify the circumstances under which wetted Nitrocellulose is considered a high explosive under 27 CFR, Part 555. As with all explosives, ATF’s focus is on the potential public safety risks associated with materials that can be misused or diverted to unlawful purposes. Subsequent contact from industry members who import, transport, store or employ wetted Nitrocellulose in the production of ammunition, however, has brought to our attention issues that were not fully addressed in the Newsletter and require further consultation and consideration with the industry. Accordingly, ATF has and will conduct further industry outreach concerning wetted Nitrocellulose. In the interim, previously authorized industry practices concerning wetted Nitrocellulose will not be affected.