Could be BS- and probably is. The Yugoslavian ammo IS messier on people though, the bullets are flat based and not boat-tailed. This means they are less stable in flight and upon impact. For the ballistic impaired, this means two things:
1. The bullet is less stable and less accurate at long ranges.
2. The bullet enters its yaw cycle (yaw= the bullet spinning sideways and causing mucho damage) after just 3-4 inches of flesh (assuming it doesn't hit bone). For comparison, Wolf would take 10 inches to enter its yaw cycle (which would be after it has passed through most, if not all of the target).
The US banned the hollow tip FMJ Russian 5.45mm ammo, the stuff that yaws almost upon impact, so they may have banned Yugoslavian due to similar ballistics. However, flat based projectiles are everywhere, jeebus I've got old 7.62x54R that is flat based and some modern production ammo is too. The Yugo ammo is nowhere near as drastic as the Russian 5.45mm, but the Yugo ammo will mess a person up worse than Wolf, Winchester, Barnaul, Federal, Remington, etc. This was discussed in a Shotgun News article a few weeks ago. Interesting ballistic concept, hopefully the Feds weren't reading the article too.
OK, found it. For those interested, the article is in the December 1st edition of Shotgun News, page 14, 4th paragraph down. The article is by Peter G. Kokalis.
SUMMARY- could the Feds find a reason to ban Yugo ammo? Sure. Do I think they did? No. It was cheap and Yugoslavia (now broken up into several smaller countries) is poor. Green laquer coated Czech ammo was everywhere, now its nowhere. It wasn't banned, it was just shot up.