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Encoding errors prevent a module being evaluated and thus imported. An attempt to import a module with an invalid encoding will fail; a SyntaxError will be raised. Note that in Python 2, the default encoding is ASCII.
The existence of an encoding error in a module may suggest other problems as well. Either the module is never imported in practice and could be deleted or a try statement around the import is mistakenly discarding the SyntaxError.
Fixing the encoding error is the obvious fix. However, it is worth investigating why a module containing an encoding error was able to persist and address that problem as well.
If a different encoding should be used for the file, specify it explicitly by putting an encoding specification at the top of the file. For instance, to specify UTF-8 encoding, add the line # coding=utf-8.
Python PEPs: PEP 263 — Defining Python Source Code Encodings.
Python Tutorial: SyntaxErrors.