This arises from a bug report submitted against Saxon by Priscilla Walmsley.

The schema includes something like this:

<xs:schema xmlns:new="ns.new">
<xs:import namespace="ns.new"/>
<xs:override schemaLocation="old.xsd">
  <xs:complexType name="P">
    <xs:sequence>
       <xs:element ref="new:Q"/>
    </xs:sequence>
  </xs:complexType>
</xs:override>
</xs:schema>

The result of applying the override.xsl transformation is a schema document that contains a reference to the name new:Q but does not contain any xs:import declaration for the ns.new namespace (because there was no reference to this namespace in the overridden schema document).

I have fixed the problem by changing the override.xsl transformation so that it copies any xs:import declarations from the "overriding" schema document as well as those from the "overridden" document. However, this is a little crude because there is potential for conflict if both documents contain imports for the same namespace, potentially with different schemaLocations.

In passing I noticed that the override.xsl I am using is a little different from that in the specification. The one in the specification appears to expect the transformation to proceed by executing the named template "perform-override" (though this is nowhere mentioned). The parameters overrideElement and overriddenSchema are given as parameters to this named template rather than as global stylesheet parameters. The standard invocation mechanism for XSLT, however, does not allow parameters to be supplied to a named entry template, only to global stylesheet parameters.

Priscilla's test case can be found at https://dev.saxonica.com/community/issues/1505