People here are spouting rules as if they were carved into stone by the gods - insurance always on the seller, values on customs forms, and on and on. Yup that is how all deals work
If the buyer requests a low value to be listed on the customs form, that is an automatic acceptance on their part that insurance cannot be provided for the full value of the item and thus the buyer is on the hook if something happens to the item while it is in transit. Putting $20 on the customs form does not help the seller in any way but can potentially save the buyer quite a bit of money like it did here. An arrangement with all of the benefits but zero risk for the buyer? That makes no sense.
As for the issue of how the knife was packaged, I am on the fence. I ship about half my items in USPS small flat rate boxes and the remaining in bubble mailers - never had a problem *knock on wood*. In either type of packaging, I do make it a point to wrap the item in foam, bubble wrap, etc so it does not move around inside and so it cannot be identified by touch alone. If someone really wants to open it and take a peek for nefarious reasons, it will be opened and taken regardless of the packaging.
Though I do agree the box can at times prevent an opportunistic theft, this is not one of those situations. Am I missing something or was this not deliberately opened at customs? Box, envelope, tube, what have you - it was going to be opened regardless and I do not see how the packaging suddenly bears so much responsibility. A Vox is very nice, hefty knife - you do not need to be a knife nut to identify it as something valuable. Even on the flip side, someone could see a $20 gift declaration and think it is no big deal if it goes missing. The empty packaging gets sealed up and sent on its way leading to this unfortunate situation. Like I said, a box would not have changed the end result. The blame should still fall on the actual thief.
Splitting the loss is an okay solution but the seller is being pretty generous to agree to that. Not much flexibility with the buyer holding him over the flames on the PP dispute. BF typically looks down upon a PP dispute being opened before any kind of agreement is discussed privately between both parties - at least from what I have seen lately.
Good luck to both of you.