This is not a bug with SQLyog and MySQL AB does not consider it a bug with the command line either. It is a 'limitation' with the Windows 'cmd.exe' program. The Windows 'mysql.exe' command line client is implemented in Windows 'cmd.exe'.

You can be perfectly sure that what SQLyog does is correct and what MySQL command line does is wrong!
Refer to: http://bugs.mysql.com/bug.php?id=31162


Also there is a limitation with the command line 'source' statement. It does not support unicode (neither utf8 nor utf16). However 'source' statement does support special ANSI characters (like accented European characters).

Refer to: http://bugs.mysql.com/bug.php?id=29323

One effect of this bug is that it is not possible to source a utf8-encoded DUMP from command line client on Windows when also the file itself is utf8-encoded.