I suspect they meant a different kind of 'loose'. Not sure of the battery type, but it's a violation of regs to carry Li-based batteries in checked luggage if they're 'loose' as in not installed in the device they power. You can check a laptop or a camcorder with the battery installed, but if you have spare batteries they must be carried on.
From the TSA website:
IIRC, that regulation was precipitated by a fire in a cargo hold caused by a loose Li-ion battery.As of January 1, 2008, the Department of Transportation (DOT) through the Pipeline and Hazardous Materials Safety Administration (PHMSA) no longer allows loose lithium batteries in checked baggage.
Learn more at http://safetravel.dot.gov/whats_new_batteries.html.
Sorry to say it, but I suspect the TSA was doing the right thing in this case.





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