Tom,
Take a deep breath and relax. If the package is in another city, CALL the postmaster there and ask for it to be returned to you ( they should do this for free). If they won't, have the customer who gave it back to them pick it up and mail it back to you by placing the whole thing in a larger box ( or some friend in that area do it for you). It will cost you a few bucks, but you will get your knife back. If none of this works, CALL the postmaster General office in DC and get someone there to look into the situation (I bet you get the knife back pronto). Once you have the knife back, then decide what the next step will be.
Yes, the problem sucks, but don't sit by fuming and let the clock tick. If the knife is destroyed beyond repair, pursue the claim immediately by appealing both by email and in writing. If it is merely damaged and fixable, get it back, fix it, and move on.
Business and life both are far too important to worry about one bad experience.