Certainly I have read stories of the US Governments seizing bitcoins suspected to have been used for criminal activities.
When you're ordered under duress (any threat) to reveal your private key or to force-send your bitcoins, you have only 2 choices: you do it and you're (likely) free from threats, or let it remain secret but you accept the consequences (the threat will be realized) .Quote
I would be happy if someone explains how this actually works since it is contradicts my first statement of an individual being free from censorship when they have control of their private keys.
You misunderstood the meaning of "free from censorship", that means when you make an onchain transaction, nothing will prevent or block the transfer of bitcoins, it will still arrive at the destination address. 