using a variable in sort block

What are the restrictions on using xsl:variables?
Am I not allowed to use it in an xsl:sort element?
I get the following error for the folowing xsl fragment:

<xsl:variable name="sortby">ARRIVED</xsl:variable>
<xsl:variable name="sortorder">descending</xsl:variable>

<xsl:template match="REPORT">
<h1>
        <xsl:value-of select="$sortby"/>
</h1>
<xsl:apply-templates select="INTERCHANGE">
        <xsl:sort select="{$sortby}" order="{$sortorder}" />  <!-- ERROR HERE 
-->
</xsl:apply-templates>
</xsl:template>

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Error in XPath Expression: Cannot use result tree fragment.

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The <xsl:value-of select="$sortby"/> outputs "ARRIVED" correctly, but dies
inside the "sort" element.



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