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UPDATE 2-U.S. reaches deal with China's phone maker ZTE - Commerce Secretary

(Repeats to show as update 2)

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 ... should serve as a very strong deterrent not only for them but for other potential bad actors," 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.

ZTE ceased major operations since the seven-year ban was imposed on the company in April for breaking a 2017 agreement that was reached after it was caught illegally shipping goods to Iran and North Korea.

ZTE's survival has been a topic of discussion in high-level U.S.-China trade talks.

U.S. President Donald Trump met with his trade advisers on Tuesday to discuss China's offer to import an extra $70 billion of American goods over a year in hopes of defusing a potential trade war between the world's two largest economies.

Ross said on Sunday he had been having frank, useful talks in China about exports, as Washington presses its message to Beijing about structural economic changes amid the festering trade dispute. (Reporting by Susan Heavey and Karen Freifeld Writing by Eric Walsh Editing by Jeffrey Benkoe)