def outer():
  a=set()
  def inner():
    a |= set(["A"])
  inner()
  return a

print(outer())

Traceback (most recent call last):
  File "main.py", line 8, in <module>
    print(outer())
  File "main.py", line 5, in outer
    inner()
  File "main.py", line 4, in inner
    a |= set(["A"])
UnboundLocalError: local variable 'a' referenced before assignment

However, the update method works as expected:

def outer():
  a=set()
  def inner():
    a.update(set(["A"]))
  inner()
  return a

print(outer())

{'A'}

Take a look at https://docs.python.org/3/faq/programming.html#why-am-i-getting-an-unboundlocalerror-when-the-variable-has-a-value

What's happening is that because `a |= x` is treated as an assignment, i.e `a = a | x`. The compiler treats it as a local variable, but since it hasn't been initialized in inner() before it reaches `a |= set(["A"])` it fails with UnboundLocalError.