So how do the commercial motor manufacturers get around this when they include the BP ejection charge in the reload kits I buy?
If it makes you feel any better, you're not the only one confused.
I don't have the specific law handy to identify in detail, but black powder is exempt from LEUPs and all the other nonsense when used in model rocket motors. Presumably this includes use either as propellant or as ejection charges. Some people have added a further layer by saying any such black powder must be purchased from a qualified motor manufacturer/vendor as part of a motor or motor kit; this could be from the ATF, or someone who was "burned" by arbitrary law enforcement, or I don't know, but it sounds vaguely right even if it is not spelled out very clearly in the statutes. A faintly gray area?
Products like Aerotech's black powder ejection charges (sold for use with their "Electronic Forward Closure" ejection system) seem to be legal to purchase, possess, and use without having the LEUP/permits/fees/Spanish Inquisition stuff. (Notice I said "seem"....we should direct specific questions about the legality of using these products to those vendors.) Another gray area?
It is my understanding that if you are making your own motors for your own use on your own property, and if you use the test motors on the same day you make them (no storage), it is possible that it is not necessary to get the LEUP/etcetera. Some people will tell you otherwise, and I cannot say whether they are simply using a conservative reading of the statutes or if they are merely the nervous type, but this is one more gray area.
It is my understanding that if you use one grain (as in, the unit of measure of weight; one seven-thousandth of a pound) of black powder for any rocketry application (including ejection charges) not on your property, or transported on public highways (to get to the launch), or transported across state lines, you are in deep doo-doo. Probably a pretty black area.
If you purchase some generic black powder, use it for rocketry, and claim that it was BP that came with the purchase of a motor, I don't know how they can tell the difference in the field. I do know that many items like BP are now sold over-the-counter with "tracers" mixed in. If they confiscated your BP and took it back to the lab for testing, you could probably get in trouble after-the-fact (which would still be in trouble).
This isn't an easy question. There are lots of over-lapping laws. There are lots of opinions, some educated and some not. There is a great deal of variation in interpretation of the law and enforcement of the law on "their" side of the fence, to add to the confusion. It is illogical to allow some backyard cannon enthusiast to freely possess 50 pounds and then not allow even one pound possession for other equally valid uses. Your best bet is to find a local lawyer and ask him...and while you're at it, ask if he will back you up if you get arrested.
And yes, this is a collosally stupid situation.