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You may also have to change the device configuration to tell calibre that your Kindle supports azw3 -- support was added via a firmware update, so calibre IIRC defaults to not assuming you can read it.
While your Kindle is plugged in, click the arrow next to the "Device" icon and select "configure this device". Make sure azw3 is checked under available formats, and then use the up arrow to move azw3 to the top of the list.
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