Warning: Long post ahead.
I work as a postal clerk, and have managed an authorized dealer post office as well; I consider myself well-trained (I've been doing this for over five years) - I've done all the online training (which I can assure you 95% of clerks in authorized retail settings have not done), and I've read the 1100+ page "Retail Operations Manual". In addition I've been selling online for nearly a decade now so I also consider myself adept in the various rules regarding shipping things around the world.
There is no "official" word/rule/regulation from Canada Post regarding how exactly the Oversized Lettermail item must fit through the slot. Anyone saying "it can't touch the sides" is just assuming that's the rule and/or they were told that by a superior at one point and have continued to run with it. As far as I'm concerned, as long as I can jam it through that 2 cm slot then it can go as Oversized Lettermail domestically. If it like barely fits through I'll tell the customer "it's right at the limit - I can send it Lettermail if you want, but it's at your risk; worse case scenario it will come back to you with postage due". I don't think I've ever had a customer come back and complain that their Oversized Lettermail item was returned to them due postage. As others have said, this interaction can be completely bypassed by just applying your own stamps and depositing the item in a mailbox.
And then we get into the sticky mix that is sending "non-Letter" items via International Letter-post. The Canadian Postal guide breaks International Letter-post down into "Acceptable Items" and "Unacceptable Items". Acceptable items include "items made of paper or other material with general characteristics of paper (for example, photographs)". This is very cut and dry: Is the item you're mailing made of paper or a paper-like substance? If yes - go ahead and ship it Letter-post! It no - sorry, you'll have to fill out a customs declaration and ship it as a parcel.
If we look at the items specifically deemed Unacceptable to be sent via Letter-post (and ignore the obvious things like dangerous goods/unmailable items) there are three main things specified: (1) small packets; (2) goods; and (3) film, audio, or video recordings (for example, diskettes, CDs, or DVDs). Pretty vague, right (at least for the first two)? By saying "small packets" they're basically saying "hey, if your item doesn't look/feel like a regular letter, it probably shouldn't be going as a letter and if it's in a non-paper envelope then it is automatically suspicious". Canada Post doesn't provide an official definition of what they mean by "goods", but Google gives a definition of "merchandise or posessions" which is a fairly standard definition. Guess what: literally EVERYTHING that you sell (i.e. it has a commercial value) would be considered "goods" and therefore TECHNICALLY can NOT be shipped via International Letter-post and must go as a parcel with a customs declaration. Yes, even if you're mailing a piece of paper (which is acceptable to go as letter-post!), but it's a piece of paper that you SOLD (i.e. deemed as 'merchandise' with a commercial value), then it is now considered "goods" and should be sent as a parcel with a customs declaration.
Now with that being said, does everyone follow these rules? Of course not, or this wouldnt even be a topic of conversation. The simple fact of the matter is that the vast majority of your mail is sorted by computers and conveyor belts that have no idea what is inside the outer casing. Neither Canada Post, the customs agency in the country you're sending to, or that country's postal service has the time to assess every piece of mail coming into the country to try and determine whether or not it's a letter. And for that reason I tend to run with the rule "if it looks like a letter, it is probably a letter". In my experience as long as your item is packaged in such a way that it looks like a letter it's going to be delivered to it's destination just fine. Is there a chance it could be rejected at some point and returned to you? Of course. Is there a chance your mail could be heavily delayed if someone catches it and sets it aside for "further processing"? Definitely (and that 'delay' is probably going to be quite significant because the people at customs aren't going to be in a huge hurry to deal with items that they KNOW you tried to fraudulently sneak by them). Is there a chance you could be investigated by a postal inspector and potentially fined for your actions which may or may not be considered customs fraud? I mean I guess, but the chances of that happening are pretty low, especially if you're an eBay seller only sending out a few items a day/week.
Any opinions expressed here are my own and do not represent the opinions of Canada Post. If you ask me questions on this topic while I'm in uniform at work then I'm probably going to give you a different answer than if you ask me while I'm sitting at home on my computer.
In summary: Can you mail something you sold online via International Letter-post? Technically, no.
Do people still do it? Yes, of course.
Should you do it? Ultimately that's a decision that you need to make and depends on your risk tolerance. But in my own experience, 95% of the time it will arrive just fine if it "looks like a letter". The other 5% of the time the items just disappear into thin air. Did they disappear because they were sent improperly without a customs declaration? Who knows.
My one piece of "golden advice" to any Canadian online reseller would be to NEVER set foot in a Canada Post location, and NEVER trust a single piece of information that is said to you by ANY employee or representative of Canada Post. I realize the irony of me saying that but it's 2021 - there is no reason you need to set foot in a post office. You can find answers to your questions online either through official channels, or by asking fellow resellers. You can print your labels online (at a cheaper price than going into the post office!) and have your things picked up or drop them in a mailbox. And you can buy stamps online (at a cheaper rate than going into a post office!). This is YOUR business - do what makes sense for you from a business perspective.
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