Since knives are a "sensitive" item in most countries, the first thing to check is the country listing on usps.com:
http://pe.usps.com/text/Imm/immctry.htm
Find the import country, and carefully read the prohibitions & restrictions. If "knives" or "weapons" are listed, it's highly likely it will be stopped, and almost certainly confiscated, by customs of the respective country.
If the import country has no such prohibitions & restrictions, proceed.
If receiving payment by PayPal, make sure that the transaction indicates you have seller protection.
Ship items of significant value via Registered Mail, and add insurance as appropriate - international RM sometimes includes some insurance in the cost; research this.
If you are not covered by PayPal seller protection policies, and/or you cannot insure an item of significant value, and your buyer, really, really wants the knife, and asks you nicely, tell him/her to send you cash ("Federal" Reserve Notes, Euro notes, or whatever paper currency you'll accept), and indicate loss for any reason in transit is not your responsibility. Cash in the mail is highly advised against by all postal systems, but I've never had trouble with doing it (but recognize it can be risky if not well-disguised in a faux "letter").