The issue is not encoding, but rather the use of the Data Types/File structure that naturally includes a Data Types/Binary element for content.
Client side modeling cannot manipulate binary content, except in the context of the Display/File Input Field (this is due to the security limitations imposed by browsers when it comes to client files, which can only be uploaded to the server). Therefore the File Input Field/<Value> element must be passed as a whole to a server side process for further processing.
The following screenshot illustrates the change required in your modeling:
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