Compilation error - COBSQ0409S when host variable exists in copybook

Problem:

Error

COBSQ0409S xxxxxxx is not a data item.  

xxxxxxx is a variable in copybook COPY1.  If  this is declared outside the copybook, then the program compiles correctly.   How can this be resolved?

Resolution:

By default the SQL Option precompiler will not expand copybooks referenced in a COPY statement. If you compile with the SQL(COPY) compiler directive, the precompiler will expand copybooks included in your source.

Refer the documentation on the SQL(COPY) directive for further information.