This parameter is applicable only if you are working with foreign (non-English) character sets. If your source data contains foreign characters, using this parameter along with the encoding value ensures that the original data is preserved from the reader to the writer.
FME supports most encodings.
By default, the character encoding will be automatically detected from the source file if there is a Byte Order Mark (BOM) present in the source file. Otherwise, all input strings will be encoded in the system encoding. If you select any other character encoding, it will take precedence over the automatically detected character encoding.
Note that only UTF encodings are identified using the BOM – all other character sets must be explicitly identified or they will be read as system encoding.