When you import the Internet Explorer 8 Beta 2 bookmarks file to a system running Internet Explorer 7 or earlier, the following error occurs when you click Finish in the Import/Export Wizard.

I could fully reproduce the problem in my Windows XP SP3 system running Internet Explorer 7. The source computer runs Windows Vista with Internet Explorer 8 Beta 2 installed. Thinking that this could be due to incorrect formatting or missing tags in the HTML file, I opened the file using Notepad but couldn’t find any errors in it. Eventually I spotted that this issue is caused by incorrect encoding used by Internet Explorer 8 Beta 2 to create/write to bookmark.htm. With that said, the fix is very simple.
To resolve the problem, save the bookmarks file as ANSI text. To do so, use the following steps:
Start Notepad, and then open the bookmarks file (bookmark.htm)

Click Save As on the File menu.
In the Save As dialog box, click ANSI in the Encoding list, and then click Save.

Click Yes when prompted to overwrite the file.
You should be able to import the bookmark file successfully using the Import/Export Wizard in Internet Explorer.
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Thanks very much for the helpful explanation.
Well done. Thanks for sharing this simple fix.
Tried all the techniques I knew, but none worked, so typed “not a valid bookmark file” into Google, and came up with you.
I immediately tried it, and it worked a treat.
Thnks very much for such a simple solution to a baffling problem.
Barry, Lancashire, U.K.
you are AMAZING–thank you!
it was a two second fix to a very frusterating issue, and you explained it in plain english.
kudos!
OMG – I love you!! Thank you sooooooooooooo much!
Wow.. Awesome.. It worked great. I have vista and was trying to copy to XP and have issue.
Hope Microsoft will fix soon.
Thanks very much…You saved all my 354 bookmarks!!!
Hi Ramesh….I was worried when i got the error message…then i googled and came to this page….i did as you said and all my ie favourites have been imported to Google bookmarks…..Thanks! for sharing this hack…..
Thanks for all the help with this. For those like me who need explicit instructions, when right clicking on the IE8 bookmark.htm file, use
“Open With” rather than “Open” and select Notepad, otherwise you will end up in Internet mode and be unable to “save as.”
Thank you very much for the only intelligent solution. I been at it for 3 days now and finally I just imported my favorites to my IE7. I had a IE8 where I exported from.