In addition to what was posted about a $25 minimum order or being a prime member, the free shipping option is only available for items sold through Amazon directly. It doesn't apply to other sellers who also sell here on Amazon.
Once they reach the level that they can be a featured seller, sellers can set their shipping prices. Those who have not reached that level (which includes paying a recurring fee to be at that level) do not get to set their shipping prices, and that includes opting-out. Their shipping prices and allowance is set by Amazon.
Routinely making partial refunds to customers counts negatively against a seller. It may be because someone wants to refund shipping costs, but it will be viewed as there being frequent problems with the items being sold. An occasional partial refund is fine, but routinely doing so may get a seller removed.