Here is an excerpt from Lauren Misak's article in The Arizona Republic:
"Investigators seized 23 inert grenades and arrested three men in Maryvale [Arizona] Tuesday night on suspicion of selling the grenades knowing they would be converted to live explosive devices... Investigators on Monday received a tip from an informant that the men were selling dormant grenades that do not contain a fuse or explosive powder. Investigators purchased seven new, round military grenades for $400 each Monday. On Tuesday night, investigators purchased an additional 16 pineapple-shaped grenades. The suspects were arrested following the second buy, DPS spokesman Steve Harrison said... Investigators believe the grenades were headed to Mexico. They do not know where the grenades came from... Detectives suspect the sellers' intent was to sell the grenades to be converted into an explosive device, which could be easily done by adding a fuse or gunpowder. While it is not illegal to sell inert grenades, it is illegal to sell them with the intent to use them as an explosive device." Link to Full Article
Analysis: Before I can fully weigh in on this, I have to remind readers that there are a lot of unanswered questions in this story. First, we don't know exactly what type of grenades they were, where they were manufactured, or how the sellers obtained them. Second, we don't know why they were selling the grenades in the US with the intent to get them live when they could have easily done the same thing with already-live grenades in Mexico.
This concerns me because the general line of thinking among Mexico observers/analysts is that military-grade hardware - like grenades, grenade and rocket launchers, and some .50-caliber rifles - are generally obtained by DTOs outside the US. Existing evidence indicates that stuff mostly comes from the Koreas, Central American countries, existing Mexican army stocks, and former Soviet bloc countries.
Remember, this incident doesn't mean that those grenades came from a US source, although the possibility does exist - and is perhaps likely. You can easily buy inert round and pineapple grenades through US military surplus dealers, as that's perfectly legal. They're cheap, too - $8.99 for an inert pineapple model. This could signal a new way of obtaining grenades for DTOs in Mexico - buy them legally in the US, convert them into live grenades, then send them south in a similar fashion to pistols and rifles.
This is a good story to keep an eye on to see what additional information develops.