What code section would allow this?
Section 502 of IFGC requires b vent to be installed per manufacturer's instructions, which for every brand of b vent is 1" clearance to combustibles. Code definition of combustible is any material that does not meet the requirements of non-combustible. The code definition of non-combustible is a material that meets certain criteria when tested in accordance with ASTM E 136 (I don't have my books in front of me right now for those criteria). These flashing do not meet that requirement.
In addition to using these flashings for b vent, they are also being used on the vent systems of several direct vent unit heaters where the vent system is a 4" single wall metal vent pipe with a 8" single wall pipe around it to bring in combustion air. The box installed inside the building behind the heater is a factory assembly from the manufacturer, but the pipe is all field assembled standard round sheet metal pipe. Single wall vent pipe (which this is, it is not a listed assembly) requires 6" clearance to combustibles, this configuration only give 2" from the single wall to the flashing.
Again, this is a major national box store club chain that has builds stores across the country, and they claim this has never been an issue before.