Material binding on instances

[cking-spire]

Do the following:
Create a polygon cube
Create a lambert material and bind that material to the cube
Duplicate that cube several times
Select all the cubes then reselect the original
Select Modify->Replace Objects, and set the "Type or Copy" to Instance.
Group the cubes. Select the group and export as USD.

I get a lot of errors that look like this:
// Warning: Can't author direct material binding on instance proxy </group1/pCube1/pCubeShape1>; try enabling collection-based material binding //

But I didn't bind the material to the instance. I bound the material to the primary object.
Is this a bug? I'd rather avoid using collection-based bindings. Are there any other work arounds I could explore?

Thanks,
Chris King
Spire Animation Studios