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UPDATE 1-U.S. reaches deal with China's phone maker ZTE - Commerce Secretary

(Adds Ross quote, details on deal)

June 7 (Reuters) - U.S. Commerce Secretary Wilbur Ross said on Thursday that Washington has reached a deal with ZTE Corp that would reverse a ban on buying parts from U.S. suppliers, allowing China's No. 2 telecommunications equipment maker to get back into business.

Under the deal, ZTE will change its board and management within 30 days, pay a $1 billion fine, put $400 million in escrow and retain a new U.S.-selected compliance team, Ross told CNBC.

He added that he did not think the arrangement would have any effect on tariff talks with China.

"We think this settlement, which brought the company, a $17 billion company, to its knees, more or less put them out of business, now they're accepting having this compliance team, whole new management team, whole new board, should serve as a very strong deterrent not only for them but for other potential bad actors ... I'm very, very happy with this arrangement," Ross told CNBC.

The deal also includes a suspended 10-year ban on buying U.S. components that could be activated by any violations, people familiar with the arrangement told Reuters.

Reuters reported exclusively on Tuesday that ZTE had signed a preliminary agreement with the U.S. Commerce Department, along with the fine and other terms. (Reporting by Susan Heavey and Karen Freifeld Writing by Eric Walsh Editing by Jeffrey Benkoe)