The error XS0036 is defined as:

"All the step types in a pipeline or library must have unique names: it is a static error (err:XS0036) if any step type name is built-in and/or declared or defined more than once in the same scope."

Test p:declare-step-003 declares one step within another, each of which has an absent 'type' attribute.

<p:pipeline version="1.0" name="pipeline" xmlns:p="http://www.w3.org/ns/xproc">
  <p:declare-step>
   ...
  </p:declare-step>
</p:pipeline>

The specification does not make it clear whether this is considered a violation of the unique names constraint.