Free shipping means "the cost of shipping is included in the price of the item". TANSTAAFL.
So if your Chinese item costs more than $20CDN, you could be charged Canadian duty and sales taxes, plus a $10 Canada Post service fee on your doorstep, before it will be handed over.
Now, at that low level it is unlikely to be assessed, but it the price is high enough to attract the attention of CBSA officials, it may be.
China and Hong Kong subsidize the cost of postal shipping for exporters, making it aritificially low.
The GPS charges the Canadian duty and tax and turn them over to the Canadian government. They do this in Kentucky, just as LLBean does in Maine. It's a normal outsourcing by the Canadian government.