RMS Lusitania was supposedly an “auxiliary cruiser”
of the Royal Navy. Perhaps that was the justification.
Of course its possible that a German sympathizer among
the longshoremen reported the cargo to the embassy.
Fascinating if a message from the embassy in Washington DC
turnsed up in the German archives..
I suspect that every civilian British passenger ship was given a similar designation, since they could be quickly transformed into troop ships. But at the time of the sinking the Lusitania was ostensibly just a passenger liner and munitions don't belong in the cargo of a passenger liner during a time of war.